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ELEMENTS 


OF  THE 


LAW  OF  PARTNERSHIP 


BY 

FLOYD   R.  MECHEM 

Author  of  Mechem  on  Agency,  Mechem  on  Pi-blic  Officers,  etc. 
Tappan  Phofessor  of  Law  in  the  University  of  Michigan. 


CHICAGO 
CALLAGIIAN   AND   COMPANY 

189  0 


COPYEIGHT,    1896, 
BY 

FLOYD   R  MECHEM. 


STATE  JOURNAL  PRINTING  COMPANY, 

Printers  and  Stereotypers, 

madison,  wis. 


PREFACE. 


Several  years  ago  the  writer  printed  for  the  use  of  his 
class  a  brief  course  of  lectures  on  Partnership.  A  wider  de- 
mand for  them  having  sprung  up,  they  have  been  revised 
and  reprinted  in  the  hope  that  they  may  be  useful  to  stu- 
dents elsewhere.  They  pretend  to  be  nothing  more  than 
the  mere  elements  of  the  subject,  and  the  endeavor  has  been 
to  keep  them  in  small  compass.  The  citation  of  authorities 
has  been  purposely  limited  to  the  leading  and  most  readily 
accessible  cases,  and  those  cited  have  been  selected  rather 
as  illustrations  of  the  text  than  as  authorities  for  it.  Much 
statement  of  cases  in  the  text  has  been  avoided,  because  the 
lectures  were  designed  to  be  used  and  were  in  fact  used  in 
connection  with  a  volume  of  selected  cases  upon  the  subject. 

It  is  assumed  that  the  study  of  Agency  will  precede  that 
of  Partnership,  and  some  knowledge  of  the  former' subject 
has  been  constantly  taken  for  granted.  If  the  style  at  times 
seems  to  be  didactic,  the  circumstances  of  the  original  com- 
position will  serve  as  an  explanation. 

Floyd  R.  Mechem. 
University  of  Michigan, 

Ann  Arbor.  May  1,  1898. 


793508 


TABLE  OF  CONTENTS. 


References  ara  to  sections. 

CHAPTEK  I. 

DEFINITIONS  AND  DISTINCTIONS. 

Partnership  defined 1 

The  essential  elements 3 

Partnership  a  contract  relation • .     .     .  3 

Is  it  a  distict  entity? 4 

The  commercial  conception  of  partnership 5 

How  a  partnership  ditTers  from  a  corporation 6 

Intermediate  associations 7 

Joint  tenancy  and  co-ownership 8 

Joint  purchasers  of  goods  for  resale 9 

Defectively  organized  corporations    .     , 10,11 

Promoters  of  companies       ....." 12 

Contemplated  partnerships 13,  14 

Classification  of  partnershii>s 15 

Classification  of  partners 16 

CHAPTER  IL 

FOR  WHAT  PURPOSES  A  PARTNERSHIP  MAY  BE  CREATED. 

May  be  created  for  carrying  on  any  lawful  business       ...  17 

But  not  for  purposes  unhiwful  or  opposed  to  i)ul)lic  policy       .  18 

Purposes  illegal  in  part 1!> 

Effect  of  illegality 20 

CII.M'TKU    III. 
WHO  .MAY   I'.K  i'Ah'TXKUS. 


In  general,  any  person  comix'ti'ut  to  contract 21 

Aliens  as  partners 22 

Infants  as  partners 23 


TABLE    OF   CONTENTS. 


Keferences  a^e  to  sections. 


Insane  persons  as  partners  . 
Married  women  as  partners 
Corporations  as  partnei's 
Finns  as  partners  ...... 

How  many  partners  there  may  be 

Of  the  delectus  2jersonarum 

Of  sub-partnerships 


24 
25 

2G 

27 
28 
29 
30 


CHAPTER  lY. 

OF  THE  CONTRACT  OF   PARTNERSHIP  AND  THE  EVIDENCE 

THEREOF. 

No  particular  formalities       ...         31 

How  contract  atfected  by  the  statute  of  frauds 32 

The  consideration  for  the  contract 33 

When  the  contract  takes  effect 34 

Question  of  partnership  one  of  mixed  law  and  fact  ....  35 

The  means  of  proof 30 

The  burden  of  proof 37 

CHAPTER  Y. 

WHAT  ACTS  AND  CONTRACTS  CREATE  A  PARTNERSHIP. 

How  question  arises 38 

Partnership  inter  se  and  as  to  third  persons 39 

I.  Of  True  PARXNERSHiPfi. 

True  partnerships,  how  classified 40 

Of  partnerships  expressly  intended 41 

Of  partnerships  not  expressly  intended 42 

Legal  intention  of  parties  controls 43,  44 

Tests  of  intention  to  form  partnership 45 

Sharing  both  profits  and  losses 46-48 

Sharing  profits,  nothing  being  said  about  losses      ...  49,  50 

Sharing  profits,  but  not  losses 51 

Partnerships  in  profits  only 52 

Sharing  gross  returns 53 

Tests  of  intention  —  Sharing  losses  only 54 

II.  Of  Quasi-Partxerships. 

Of  partnerships  as  to  third  persons 55 

1.  Of  Sharing  Profits. 

Profit-sharing  formerly  the  test  of  partnei'ship 56.  57 

Of  the  case  of  Cox  v.  Hickman 58-60 

vi 


TABLE    OF    CONTE^"^S. 

Beferenees  ara  to  sections. 
Effect  of  Cos  V.  Hickman  in  En-land 

Effect  of  Cox  V.Hickman  in  United  States*     ','.[[[',        62-€8 
2.  Of  Holding  Out  as  a  Partner. 

Person  may  become  liable  as  a  partner  by  holding  out.     .     .  69 
VV  hat  facts  must  exist 

Who  may  enforce  liability     ...'.'.'.**'*'  "^^ 

Tlie  evidence  admissible    .  -  *     •  -  •  "^^ 

The  effect       .     .  "^2 

73 

CHAPTER  VI. 

OF  SOME  INCIDENTS  OF  PARTNERSHIP. 


In  general 


74 


I.  Of  Articles  of  Partnership. 

Of  the  necessity  of  articles 

Of  the  scope  of  the  articles  ...*.'* "^^ 

Of  tlie  construction  of  articles      .'     *     .' "^^ 

Of  waiving  or  enlarging  by  conduct  *     *     * ^ 

Of  continuing  under  former  articles ''^ 

Of  the  usual  clauses  in  articles      .     .     .* '^^ 

Of  enforcing  the  provisions  ^^ 

81 

IL  Of  the  Firm  Name.  » 

Of  the  necessity  of  a  firm  name 

What  name  may  be  adopted     .     .     ' ^^ 

What  maybe  done  in  the  firm  name*     .'     .' ®^ 

Of  the  firm  name  as  property  ®* 

-Of  the  right  to  the  firm  name  upon  dissolution     .*****  «« 

•       •       •       .  00 

III.  Of  the  Good-will. 
What  is  meant  by  good-will 

Good-will  as  an  asset       .     .     .     ' ^'^ 

Disposition  of  good-will  upon  dissolution    .'.'!****  ^^ 

•  •  •  •  Q\f 

IV.  Of  the  Capital  of  the  Firm. 
What  constitutes  capital 

Fixing  amounts  and  interests  in ^^ 

What  may  be  received  as  contribution ^^ 

b  vii  ^^ 


TABLE    OF    CONTENTS. 

References  are  to  sections. 

V,  Of  the  Property  of  the  Firm. 

1.  Of  Firm  Property  in  General. 

What  may  be  partnership  property 93- 

What  constitutes  partnership  property 94 

Property  bought  by  one  partner  in  his  own  name  ...  95^ 

Property  used  by  the  firm 96 

Nature  of  each  partner's  interest 97 

Extent  of  each  partner's  interest 98 

Transfer  of  shares 99 

Seizure  of  partner's  share  by  his  creditor 100 

2.  Of  the  Title  to  Personal  Property. 

May  be  held  in  firm  name 101 

May  be  held  in  name  of  one  partner  for  the  firm       ....  103 

Title  is  in  firm  collectively 103 

3.  Of  the  Title  to  Real  Estate. 

Legal  title  cannot  be  taken  in  firm  name 104 

Equitable  title  is  in  the  firm 105^ 

When  land  is  partnership  property 106,  107 

Nature  of  partner's  interest  in  firm  realty 108 

Partnership  realty,  when  deemed  personal  estate      .     .     ,     ,  109 

Bona  fide  purchaser  from  partner  having  legal  title      .     .     .  110 

Interest  of  surviving  partner  in  firm  realty Ill 

CHAPTER  YII 

OF  THE  RIGHTS  AND  DUTIES  OF  PARTNERS  TOWARDS  EACH 

OTHER. 

Duty  of  partners  to  exercise  good  faith 113 

Duty  not  to  carry  on  competing  business 113 

Duty  to  exercise  care  and  skill 114 

Duty  to  conform  to  partnership  agreement 115 

Duty  to  keep  accounts 116 

Duty  to  consult  with  each  other 117 

Right  of  each  to  participate  in  business 118 

Right  of  partner  to  extra  compensation 119, 120 

Right  of  partner  to  interest  on  advances 121 

Right  to  have  partnership  property  applied  to  payment  of 

I»artnership  debts 122 

One  partner  cannot  apply  partnership  property  to  his 

own  uses 123- 

Claims  of  partnership  creditors  based  on  this  right  of 

partners 124 

Right  to  contribution  and  indemnity 135-12^ 

viii 


TABLE   OF   CONTENTS. 
Eeferences  are  to  sections. 

CHAPTER  Yin. 

OF  ACTIONS  BETWEEN  PARTNERS. 
Of  actions  between  partners  in  general ,     ,  128 

I.  Actions  at  Law. 
What  cases  arise 129^ 

1.  Partner  against  Firm, 

One  partner  cannot  sue  the  firm  at  law 130-132 

2.  Firm  against  Partner. 

Firm  cannot  sue  partner  at  law    , 133 

3,  Partner  against  Partner. 

One  partner  cannot  sue  another  at  law  on  claim  arising  out 

of  partnership  transactions .  134 

One  partner  may  sue  if  claim  does  not  involve  partnership 

transactions 135 

Illustrations  of  the  rule 136-143 

One  partner  may  sue  another  for  breach  of  partnership  agree- 
ments       143 

For  wrongful  practices  resulting  in  loss 144 

For  fraud  in  inducing  partnership 145 

On  matters  distinct  from  partnership 146 

4  Firm  against  Firm  having  Common  Partner. 

One  firm  cannot  sue  another  at  law  if  they  have  a  common 

partner 147 

II,  Actions  in  Equity. 

Equity  the  proper  tribunal  in  partnership  matters    ....  148 

1.  Specific  Performance. 

In  what  cases  granted 149-151 

2.  Injunctions. 
In  what  cases  granted 152 

3.  Accounting  and  Dissolution. 

In  what  cases  granted 15;} 

Wlio  may  liave  accounting 154 

4.  Receiver. 

When  receiver  appointed 155 

Powers  ari'l  <luti  s  of  receiver 156 


TABLE    OF    CONTENTS. 
References  are  to  sections. 


CHAPTEE  IX. 

OF  THE  POWERS  OF  PARTNERS. 

In  general 157 

I.  Powers  as  Between  Partners  Themselves. 

As  between  themselves,  partners  may  agree  upon  powers  .     .  158 

If  no  agreement,  usual  powers  implied 159 

II.  Powers  as  Between  Firm  and  Third  Persons. 

Of  what  matters  third  persons  must  take  notice 160 

Nature  and  extent  of  business  to  be  observed 161 

Distinction  between  trading  and  non-trading  firm     ....  163 

Power  of  one  partner  to  dissent  from  proposed  acts  ....  163 

Of  the  partner  as  the  agent  of  the  firm 161 

Partner  no  implied  power  outside  the  scope  of  business     .     .  i6o 

What  is  meant  by  scope 166 

Extending  scope  by  conduct 167 

Consideration  of  particular  powers 168 

Admissions 160 

Agents 170 

Arbitration 171 

Assignments  for  creditors 173 

Attorneys 17o 

Bills  and  notes 174 

Borrowing  money 175 

Buying 176 

Collecting  and  receiving  payment 177 

Compromises 178 

Confessing  judgment 179 

Deeds  and  other  sealed  instruments 180 

Hiring  property 181 

Insurance 183 

Mortgages  and  pledges 183 

Notice 184 

Payment 185 

Sales 186 

Suits  at  law 187 

Suretyship  and  guaranty 188 

The  powers  of  the  majority 189 

Ratification  of  unauthorized  acts 190 

X 


TABLE    OF   COXTENTS. 
Eeferences  are  to  sections. 

CHAPTER  X. 

WHO  ARE  BOUND  BY  THE  ACTS  OF  A  PARTNER. 
In  general    .     . 

191 

I.  In  Contract. 
AH  partners  bound  by  authorized  contracts 


Dormant,  secret  and  nominal  partners  bound HI 

Liability  of  firm  iir.r.n   ^^r,<->„„i._  _      ,     ,  IJ'J 

one  partner  in  his 

<y  one  partner 


own  name       .... 

^""otegivtn  by  one  partner     .     .     .     , ^-H  195 

Unknown  partnersliips      .     .     .     .     , ^^^ 

Contracts  under  seal     ....'* ^^^ 

Judgment  against  one  partner ^^^ 

Contracts  made  in  individual  names  of  ;ii;h;pa"rtn;rs'     "     *  200 

Con  rac  s  wheia  firm  does  business  in  name  of  one  partne      '  20i 

^ziti::::: ''-:  -: ';- «--  -  --  --  u  :om: 

Liability  of  partner  who  exceeds  his 'authority     .*     .'    .'    .'    .*  |o3 

IL  In  Tort. 

Krm  liable  for  torts  of  one  partner  in  scope  of  business  204 

When  liable  for  his  malicious  or  penal  act                             *     *  ^t 

^\  hen  liable  for  partner's  breach  of  trust  .     .     .'     .'     ."     .*     .'  jJe 

CHAPTER  XL 

OF    THE  LIABILITY    OF  THE   FIRM  FOR   THE  ACTS   OF   ITS 
AGENTS  AND  SERVANTS. 

207 


CHAPTER  XII. 


OF    THE    NATURE    AND    EXTENT    OF   THE    LIABILITY 


PARTNERS 
In  general    .     . 

208 

L  Of  the  Nature  op  Partnership  OBLiOAXiONa 

Partnership  obligations  in  contract  are  joint  .     . 

Judgment  against  one  releases  all  .                      '     *     '     *    om  o  , 
Kelease  of  one  rc'lease.s  all  -J", -11 

Partnership  obJigations  in  tort  are  Joint  and  s.v;.rai     '.     [     [  l]l 

xi 


TABLE    OF    CONTENTS. 

Eeferences  are  to  sections. 

11.  Op  the  Extent  of  Partnership  Liability. 

Each  partner  liable  for  whole  of  partnership  obligations     .     . 
Individual  property  of  one  partner  may  be  taken  to  satisfy 

partnership  debts 

Partner  whose  projjerty  is  so  taken  may  have  contribution     . 
Exemptions  from  execution 

III.  Op  the  Beginning  and  Ending  of  Liability. 

l.n  general 

'Of  an  incoming  partner 

<  Of  an  outgoing  partner 

CHAPTER  XIII. 
OF  ACTIONS  BY  AND  AGAINST  THE  FIRM. 
In  general 

I.  Actions  by  the  Firm. 

What  questions  involved 

1.  In  Contract. 

■  a.  Contracts  made  in  firm  name 

■  b.  Contracts  made  in  name  of  one  partner  for  the  firm       .     . 
Actions  cannot  usually  be  brought  in  firm  name      .     .     ,     , 

2.  In  Tort. 
All  partners  sue  for  tort  affecting  firm 

IL  Actions  against  the  Firm. 

What  questions  involved 

1.  In  Contract. 

All  actual  and  ostensible  partners  should  be  joined       .     .     . 
Dormant  and  secret  partners  proper  but  not  necessary  parties 

2.  Action  of  Tort. 

Actions  of  tort  may  be  brought  against  all  or  any  of  the  part- 
ners         

xii 


214 

215 
216 

217 


218 
219 
220 


221 


222 


223 

224 
225 


226 


221 


228 
229 


230 


TABLE   OF   CONTENTS. 
Beferences  are  to  sections. 

CHAPTER  XIY. 
OF  THE  TERMINATION  OF  THE  PARTNERSHIP. 

<Ot  the  methods  of  termination  in  general 231 

L  Termination  by  Act  of  Parties. 
1.  Termination  by  Original  Agreement 

What  methods  included 232 

Termination  bj^  lapse  of  time 233 

Termination  by  accomplishment  of  object 234 

2.  Dissolution  by  Subsequent  Act  of  Parties. 

In  general 235 

"Dissolution  by  act  of  all  —  Mutual  consent 236 

Dissolution  by  act  of  one  —  Partnership  at  will 237 

Partnership  on  condition 238 

Dissolution  by  one  partner  when  created  for  definite  period  .  239 

Can  there  be  an  indissoluble  partnei'ship? 240-242 

Method  of  dissolving  by  act  of  one  partner 243 

II.  Termination  by  Act  or  Operation  of  Law. 
"What  methods  included 244 

1.  Events  Causing  Termination. 

iDeath  of  a  partner 245 

Insanity  of  a  partner 246 

Bankruptcy  of  a  jjartner 247 

Marriage  of  a  partner 248 

Guardianship  of  a  partner ■  249 

War  between  countries  of  partners 250 

3.  Termination  by  Decree  of  Court. 

.Declaring  void 251 

Dissolving  in  equity 252 

'Causes  for  dissolution  —  Fraud 253 

Insanity  or  incapacity  of  partner 254 

Misconduct  of  a  partner 255,  256 

Impossibility  of  success 257 

CHAPTER  XY. 

OF  NOTICE  OF  THE  DISSOLUTION. 

The  necessity  of  notice 258 

In  what  cases  required  —  Not  on  dissolution  by  mere  opera- 
tion of  law 259 

RefjuinyJ  on  dissolution  l)y  or  (lirou;;li  .n't  of  partii-s  .      .  260 

xiii 


TABLE   OF   CONTENTS. 


References  are  to  sections. 


To  whom  notice  required "*•  261 

How  notice  given  —  1.  To  previous  customers 262 

2.  To  strangers 263 

"Who  should  give  notice  —  Actual  and  ostensible  partners  .     .  264 

Dormant  and  secret  partners 265 

Effect  of  not  giving  notice 266 

CHAPTER  XYI. 

OF  THE  EFFECT  OF  DISSOLUTION  UPON  THE   POWERS   OF 

PARTNERS. 

In  general 267 

Rights,  powers  and  liabilities  of  surviving  partner   ....  268 

How  where  he  continues  business  under  provisions  of  will  269 

Liability  of  estate  of  deceased  partner 270 

Powers  of  partners  after  dissolution  —  Continue  for  purpose 

of  closing  up  the  business 271 

Have  no  power  to  create  new  obligations 273 

Powers  of  settling  or  liquidating  partner .  273 

CHAPTER  XYII. 

OF  SPECIAL  AGREEMENTS  BETWEEN  THE  PARTNERS  AT  DIS- 
SOLUTION. 

Agreements  as  to  distribution  of  property  or  payment  of  debts  274 

Agreements  creating  relation  of  principal  and  surety      .  275 

— jr  Creditor's  assent  to  arrangement 276 

CHAPTER  XYIII. 

OF  THE  LIEN  OF  PARTNERS. 

In  general •  277 

Nature  of  the  right 278 

When  it  becomes  important .  279 

To  what  lien  attaches 280 

Against  whom  lien  exists 281 

What  the  lien  secures 283 

How  lien  is  lost 283 

No  lien  if  partnership  illegal 284 

CHAPTER  XIX. 

OF  THE  APPLICATION  OF  THE  PARTNERSHIP  ASSETS. 

In  general 285 

What  principles  govern 286 

xiv 


TABLE    OF    CONTEXTS. 


Beferences  are  to  sections. 


Application  by  partners  themselves  while  partnership  con- 
tinues       28T 

Right  of  firm  to  assume  individual  debts  of  partner    .     .  288 

Application  by  court  —  Firm  creditors  have  priority      .     .     .  289 

Joint  but  not  firm  creditors  postponed 290 

Partner  cannot  compete  with  firm  creditors       ....  291 

Individual  creditors  postponed  to  partners'  claims       .     .  293 

Individual  creditors  usually  have  priority  in  individual  assets  293 

The  contrary  view 294 

Rules  ai^ply  only  where  there  are  two  funds      .     .     .     .  295 

Firm  cannot  compete  with  sejjarate  creditors    ....  296 

Right  of  partner  to  apply  individual  assets  to  firm  debts  297 

Right  of  partners  to  convert  firm  into  individual  property      .  298 

Application  where  there  was  no  ostensible  firm 299 

Equitable  rules  do  not  defeat  legal  priorities •  300 

CHAPTER  XX. 

OF  THE  FINAL  ACCOUNTING. 

Necessity  for  accounting 301 

Basis  of  accounting 303 

Same  subject  —  Rights  of  general  creditors  to  present  claims.  303 

Partnership  debts  to  be  first  paid 304 

Manner  of  accounting 305, 306 

Same  subject  —  Loss  of  capital,  how  borne 307,  308 

Opening  and  restating  accounts 309 

CHAPTER  XXI. 

OF  LIMITED  PARTNERSHIPS. 

Of  the  nature  of  such  partnerships 310 

They  must  Vje  authorized  by  statute 311 

The  usual  statutory  requirements 313 

Necessity  for  compliance  with  statute 313 

What  business  may  be  conducted 314 

How  business  conducted 315 

Dissolution  and  notice 316 

APPENDIX  A. 
Partnership  Statutes Page  209 

APPENDIX  B. 
Partnership  Forms Page  25T 

XV 


TABLE  OF  CASES. 


References  are  to  sections. 


Aas  V.  Benham  (2  Ch.  244),  112, 113. 
Abbott  T.  Johnson  (32  N.  H.  9),  189, 

259,  261. 
Adams  v.  Beall  (67  Md.  53),  23. 
Adams  v.  Hardware  Co.  (78  Ga.  485), 

195. 
Adams  v.  Shewalter  (139  Ind.  178), 

252. 
Aigen  v.  Railroad  Co,  (132  Mass. 

423),  54. 
Aiken  v.  Steiner  (98  Ala.  355),  217.' 
Alexander  v.   Alexander   (85  Va. 

353),  179. 
Alexander  v.  Gorman  (15  R.  I.  421), 

295. 
Alkire  v.  Kahle  (123  111.  496),  107. 
Allen,  In  re  (41  Minn.  430),  312. 
Allen  V.  Center  Valley  Co.  (21  Conn. 

130),  298. 
Allen  V.  Farrington  (2  Sneed,  Tenn., 

526),  177. 
Allen  V.  Wells  (22  Pick.  450),  300. 
American  Salt  Co.  v.  Heidenheimer 

(80  Tex.  344),  11. 
Anderson  v.  Powell  (44  la.  20),  19. 
Andrew  v.  Planters'  Bank  (7  S.  & 

M.  192),  188. 
Armstrong  v.  Kleinhaus  (82  Ky. 

303),  88. 
Arnold  v.  Brown  (24  Pick.  89).  259. 
Arnold  v.  Hageman  (45  N.  J.  Eq. 

•     186),  124,  288. 
Artman  v.  Ferguson  (73  Mich.  146), 


Ash  V.  Guie  (97  Pa.  St.  49),  7. 
Askew  V.  Springer  an  111.  662),  120. 
Atkins  V.  Hunt  (14  N.  H.  205),  14. 
Atlas  National  Bank  v.  Savery  (127 

Mass.  75),  188. 
Aubin  V.  Holt  (2  K.  &  J.  66),  149. 
Austin  V.  Appling  (88  Ga.  54),  263, 

265. 
Austin  V.  Holland  (69  N.  Y.  571), 

262,  266. 

B. 

Backus  V.  Taylor  (84  Ind.  503),  262. 
Bagley  v.  Smith  (10  N.  Y.  489),  137. 
Baker  v.  Mayo  (129  Mass.  517).  121. 
Bank  v.  Delafield  (126  N.  Y.  410),  1 33. 
Bank  v.  Green  (40  Ohio  St.  431),  275, 

276. 
Bank  v.  Matthews  (49  N.  Y.  12),  259. 
Bank  of  Buffalo  v.  Thompson  (121 

N.  Y.  280),  4. 
Bank  of  Montreal  v.  Page  (98  111. 

109),  234,  236. 
Bank  of  Rochester  v.  Montoath  (1 

Den.  402),  83,  201. 
Banner  Tobacco  Co.  v.  Jenison  (48 

Mich.  459),  165,  106. 
Barcroft  v.  llaworth  (29  la.  402),  83. 
Bardwell  v.  Perry  (19  Vt.  292).  278. 
Barnes  v.  Boyers  (34  W.  Va.  303), 

276. 
Barry  v.  Briggs  (22  Mich.  201).  208. 
Barry  v.  Jones   (11    Ileisk,   Tenn., 

206),  119. 


TABLE    OF    CASES. 


Keferences  are  to  sections. 


Barton  v.  Lovejoy  (56  Minn,  iJ80), 

268. 
Bassett  v.  Shepardson  (52  Mich.  3), 

248. 
Bates  V.  Babcock  (95  Cal.  479),  17, 

32,  53. 
Bates  V.  Laue  (62  Mich.  132),  139. 
Baxter  v.  Hart  (104  Cal.  344),  51. 
Baxter  v.  Rollins  (90  Iowa,  217), 

161. 
Bays  V.  Conner  (105  Ind.  415),  174. 
Beacannon  v.  Liebe  (11  Oreg.  443), 

147. 
Beauchamp,  Ex  parte  (1  Q.  B.  1),  5. 
Beckham  v.  Drake  (9  M.  &  W.  79), 

.  197. 
Beecher  v.  Bush  (45  Mich.  188),  44, 

50,  53,  63. 
Beede  v.  Fraser  (66  Vt.  114),  134. 
Behrens  V.  McKenzie  (23  Iowa,  343), 

24. 
Bell  V.  Hudson  (73  Cal.  285),  153. 
Belser  v.  Tuscumbia  Banking  Co. 

( —  Ala.  — ),  25. 
Benjamin  v.  McConnell   (4  Gilm. 

536),  212. 
Bennett  V.  Stickney  (17  Vt.   531), 

187. 
Bentley  v.  Harris  (10  R.  I.  434),  154. 
Berkshire  Woolen  Co.  v.  Juillard 

(75  N.  Y.  535),  83,  200. 
Bernard  v.  Plank  Road  Co.  (6  Mich. 

274),  165. 
Bernheimer  v.  Rindskopf  (116  N.  Y. 

428),  288. 
Berry  v.  Gillis  (17  N.  H.  9),  212. 
Berthold  v.   Goldsmith   (24  How. 

541),  48,  50. 
Bigelow  V.  Gregory  (73  111.  197),  11. 
Bigelow  V.  Reynolds  (68  Mich.  344), 

226. 
Bignold   V.  Waterhouse   (1   Maule 

&  Sel.  255),  184. 
Bininger  v.  Clark  (60  Barb.  113),  85. 
Bird  V.  Bird  (77  Me.  499),  296. 


Bird  Co.  v.  Hurley  (87  Me.  579),  25. 
Birmingham  Loan  Co.  v.  First  Nat. 

Bank  (100  Ala.  249),  83. 
Bixler  v.  Kresge  (169  Pa.  St.  405), 

23. 
Blair  v.  Black  (31  S.  C.  346),  294. 
Blair  v.  Wood  (108  Pa.  St.  278),  270.. 
Blake  v.  Sweeting  (121  111.  67),  237. 
Blanchard  v.   Pascal  (68  Ga.    32), 

217. 
Blater  v.  Sands  (29  Kan.  551),  243. 
Blissett  V.  Daniel  (10  Hare,  493),  77. 
Blue  V.  Leathers  (15  111.  32),  53. 
Blumenthal  v.  Whitaker  (170  Pa. 

St.  309),  313. 
Blythe,  Ex  parte  (16  Ch.  D.  620), 

291,  304. 
Boardman  v.  Adams  (5  Iowa,  224), 

165,  167. 
Boardman  v.  Close  (44  Iowa,  428), 

79. 
Bohrer  v.  Drake  (33  Minn.  408),  234. 
Bond  V.  Gibson  (1   Camp.  185),  176. 
Booth  V.  Jarrett  (52  How.  Pr.  169), 

88. 
Bosanquet  v.  Wray  (6  Taunt.  597), 

147. 
Boston  Smelting  Co.  v.  Smith  (13 

R.  L  27),  35,  48,  50,  68. 
Boughner  v.  Black  (83  Ky.  521),  144. 
Bowen  v.  Rutherford  (60  111.  41),  36. 
Bowker  v.  Bradford  (140  Mass.  521), 

25. 
Bowyer  v.  Anderson  (2  Leigh,  550), 

50. 
Boyd  V.  Thompson  (153  Pa.  St.  78), 

179. 
Bracken  v.  Dillon  (64  Ga.  243),  219. 
Bracken  v.  Kennedy  (4  111.  558),  153. 
Bramah  v.  Roberts  (3  Bing.  N.  Cas. 

963),  174. 
Brass  &  Iron  Works  Co.  v.  Payne 

(50  Ohio  St.  115),  86. 
Brennan    v.   Pardridge   (67   Mich.- 

449),  83. 


TMiLi:    OF    CASES 


References  are  to  sections. 


Brewer  v.  Browne  (6S  Ala.  210),  109. 
Briar   Hill   C.    &  I.   Co.   v.   Atlas 

Works  (146  Pa.  St.  290),  313. 
Brill  V.  Hoile  (53  Wis.  537),  275. 
Bromley  v.  Elliott  (38  N.  H.  287), 

57,  161,  193. 
Brooke   v.   Washington    (8  Gratt. 

248),  193. 
Brooks  V.   Brooks  (12  Heisk.   12), 

268. 
Brooks  V.  Hamilton  (10  Mart.,  La., 

283),  165. 
Brooks   V.  Martin   (2  Wall.  70),  20, 

112. 
Broughtcn  v.   Manchester  AVater 

Works  (3  Barn.  &  Aid.  1),  174. 
Brown  v.  Chancellor  (61  Tex.  437), 

248. 
Brown  v.  Crandall  (11  Conn.  92),  36. 
Brown  v.  Foster  ( —  S.  C.  — ),  265. 
Brown  v.  Fresno  Raisin  Co.  (101 

Cal.  222),  195. 
Brown  v.   Hartford  Ins.  Co.  (117 

Mass.  479),  182. 
Brown  v.  Tapcott  (0  M.  &  W.  119), 

50,  138. 
Bruce  v.  Hastings  (41  Vt.  380),  53, 
Bruckett  v.  Downs  (163  Mass.  70), 

123. 
Brundage  v.  Mellon  (—  N.  Dak.  — ), 

204. 
Buchan  v.  Sumner  (2  Barb.  Ch.  165), 

292. 
Buck  V.  Smith  (29  Mich.  160),  81, 

150. 
Bucki  V.  Cone  (25  Fla.  1),  204. 
Buffuni  V.  Bufluni  (49  Me.  108),  111. 
Bulger  V,  Rosa  (119  N.  Y.  459),  298. 
Bull  V.  Cole  (77  Cal.  54),  139. 
Bullen  V.  Sliari.  (1  C.  P.  86),  61. 
Bullock  V.  Hubbard  (23  Cal.  495), 

27,  289. 
Burckle  v.  Eckhart  (I  Den.  341),  50. 
Burgan  v.  Lyell  (2  Wwh.  102),  169. 
Burgess  v.  Badger  (124  III.  288),  1  I<J. 


Burley  v.  Harris  (8  N.  H.  233),  133. 
Burnett  v.  Snyder  (81  N.  Y.  550).  30. 
Burt  V.  Lathrop  (52  Mich.  106),  7. 
Bush  V.  Linthicum  (59  Md.  344).  23. 
Butchart  v.  Dresser  (4  D.,  M.  &  G. 

542),  268. 
Butler  V.   American    Toy  Co.  (46 

Conn.  136),  26. 
Butler  V.  Mullen   (100  Mass.  453), 

259. 
Butler  Savings  Bank  v.  Osborne 

(159  Pa.  St.  10),  8. 
Buzard  v.  Greenville  Bank  (67  Tex. 

83),  50. 
Buzard  v.  McAnulty  (77  Tex.  438), 

13. 

c. 

Caldwell  v.  Davis  (10  Colo.  481),  112. 
Calkins  v.  Smith  (48  N.  Y.  614),  144. 
Callender  v.  Robinson  (96  Pa.  St. 

454),  193. 
Calvert  v.  Miller  (94  N.  C.  600),  268. 
Calvifs  Ex"r  v.  Markham  (3  How. 

343),  147. 
Camujack  v.  Johnson  (2  N.  J.  Eq. 

163).  299. 
Camp  V.  Grant   (21  Conn.  41),  270, 

294. 
Cannon  v.   Lindsay  (85  Ala.   198), 

123,  185. 
Capper's  Case  (1  Sim.  178).  12. 
Carey  v.  Burruss  (20  W.  Va.  571),  25. 
Carghill  v.  Corby  (15  Mo.  425),  161. 
Carley  v.  Jenkins  (46  Vt.  721),  170. 
Carpenter    v.    Greenup   (74   Mich. 

664),  130. 
Carrie  v.   Clovcrdale   Co.   (90  Cal. 

84),  99. 
Carter  v.  Roland  (53  Tex.  540),  243. 
Carver  Machine  Co.  v.  Bannon  (85 

Tenn.  712),  124. 
Case  V.   B.'aurcgard   (99  U.  S.  119), 

2H!». 
Ciivlon  \.  Il.iiilv   ('.'7   Mo.  5;!(;),  Isc,. 


TABLE   OF   CASES. 


References  are  to  sections. 


Central  National  Bank  v.  Frye  (148 

Mass.  498),  263. 
Chambers  v.  Sloan  (19  Ga.  84),  5. 
Champion  v.  Bostwick  (18  Wend. 

175),  53. 
Channon  v.  Stewart  (103  111.  541), 

154. 
Chapline  v.  Conant  (3  W.  Va.  507), 

50. 
Chapman  v.  Evans  (44  Miss.  113), 

147. 
Chapman  v.  Huglies  (104  Cal.  302), 

43. 
Charles  v.  Eshleman  (5  Col.  107), 

173. 
Charlton  v.  Sloan  (76  Iowa,  288),  114. 
Chessher  v.  Clam  ( —  Tex.  Civ.  Ap. 

),  297. 

Chester  v.  Dickerson  (54  N.  Y.  1), 

17,  32,  204. 
Chicago  V.  Sheldon  (9  Wall.  50),  76. 
Chittenden  v.  Whitbeck  (50  Mich. 

401),  88. 
Citizens'  Bank    v.   Williams    (128 

N.  Y.  77),  287. 
Citizens'  Nat.  Bank  v.  Johnson  (79 

Iowa,  290),  183. 
Claflin  v.  Behr  (89  Ala.  503).  293. 
Claflin   V.  Bennett   (51   Fed.    Rep. 

693),  309. 
Clark  V.  Gridley  (41  Cal.  285),  153. 
Clark  V.  Jones  (87  Ala.  474),  83. 
Clarke  v.  Mills  (36  Kan.  393).  132. 
Clarke  v.  Railroad  Co.  (136  Pa.  St. 

408),  189. 
Clarke  v.  Wallace  (1  N.  Dak.  404), 

188. 
Clay  V.  Field  (34  Fed.  Rep.  375),  268. 
Clayton  v.  May  (68  Ga.  27),  215. 
Clement  v.  Clement  (69  Wis.  599), 

272. 
Clements   v.   Jessiip   (36   N.  J.  Eq. 

589).  288. 
Cleveland    v.   Woodward   (15    Vt. 

302),  197.  229. 


Cleveland  Paper  Co.  v.  Courier  Co. 

(67  Mich.  152),  26. 
Clifton  V.  Howard  (89  Mo.  192),  48. 
Clough,  In  re  (31  Ch.  D.  326),  268. 
Cobb  V.  Cole  (44  Minn.  278),  309. 
Cocke  V.  Branch  Bank  (3  Ala.  175), 

174. 
Cogswell  V.  Wilson  (11  Ore.  372!),  48. 
Coller  V.  Porter  (88  Mich.  549),  175. 
Collier  v.  McCall  (84  Ala.  190),  204. 
Collins'  Appeal  (107  Pa.  St.  590),  98. 
Collner  v.  Greig  (137  Pa.  St.  606), 

106. 
Columbia   Land  &    Cattle   Co.   v. 

Daly  (46  Kan.  504),  315. 
Conroy  v.  Woods  (13  Cal.  626),  289. 
Consolidated  Bank  v.  State  (5  La. 

Ann.  44).  51. 
Const  V.  Harris  (1  T.  &  R.  496),  78, 

189.     • 
Continental  Nat.  Banl:  v.  Strauss 

(137  N.  Y.  148).  23. 
Cook,  Ex  parte  (Mont.  228),  291. 
Cook  V.  Canny  (96  Mich.  398),  138, 
Cook  V.  Carpenter  (34  Vt.  121),  14, 
Cook  V.  Slate  Co.  (36  O.  St.  135),  36.. 
Coope  V.  Eyre  (1  H.  Bl.  37),  9. 
Cornhauser  v.  Roberts  (75  Wis.  554), 

70. 
Cossack  V.  Burgwyn  (112  N.  C.  304),. 

62. 
Cottle  V.  Leitch  (35  Cal.  434),  255. 
Cowan  V.  Creditors  (77  Cal.  403),. 

217. 
Cowan  V.  Gill  (11  Lea,  674),  296. 
Cowen  V.  Hardware   Co.  (95  Ala. 

324),  123. 
Cox  V.  Hickman  (8  H.  L.  Cas.  268),. 

58. 
Craft  V.  McConoughy  (79  111.  346),., 

20. 
Crescent  Ins.  Co.  v.  Bear  (23  Fla. 

50),  20. 
Crites  v.  Wilkinson  (65  Cal.  559),, 

186. 


TABLE   OF   CASES. 
Keferences  are  to  sections. 


Crooker  v.  Crooker  (52  Me.  267),  196, 

292. 
Crosby  v.  Timolat  (50  Minn.  171), 

147. 
Crosthwait    v.    Ross    (1    Humph., 

Tenn.,  23),  174. 
Crnttwell  v.  Lye  (17  Ves.  335),  87. 
Culley  V.  Edwards  (44  Ark.  423),  48, 

50,  68. 
Curtis  V,  Woodward  (58  Wis.  499), 

295. 
Cutler  V.  Winsor  (6  Pick.  335),  53. 

D. 

Dana  v.  Stearns  (3  Cush.  372),  23, 
Darby  v,  Gilligan  (33  W.  Va.  246), 

298. 
Davis  V.  Amer  (3  Drew.  64),  149. 
Davis  V.  Atkinson  (124  111.  474),  123. 
Davis  V,  Berger  (54  Mich.  652),  171. 
Davis  V.  Cook  (14  Nev.  265),  176. 
Davis  V.  Davis  (60  Miss.  615),  95, 

153. 
Davis  V.  Gelhaus  (44  Ohio  St.  69),  18. 
Davis  V.  Megroz  (55  K  J.  427),  271. 
Davis  V.  Merrill  (51  Mich.  480),  130. 
Davis'  Estate  (5  Whart.  530),  273. 
Davison  v.  Holden  (55  Conn.  103),  7. 
Day  V.  Stevens  (88  N.  C.  83),  53. 
Dayton  v.  Bartlett  (38  Ohio  St.  357), 

268. 
Deakin  v.   Underwood  (37  Minn. 

101),  170. 
Deardorf  v.  Thacher  (78  Mo.  128), 

174. 
Denholm  v.  McKay  (148  Mass.  434), 

268. 
Denver  v.  Roane  (99  U.  S.  355),  153. 
DeTastet  v.  Shaw  (1  B.  &  A.  664),  147. 
Diamond  v.  Henderson  (47  Wis.  172), 

116, 
Dils  V,  Bridge  (23  W.  Va.  20),  50. 
Divine  v.  Mitch um  (4  B.  Mon.  488), 

292. 


Dob  V.  Halsey  (16  Johns.  34),  57. 
Doggett  V.  Dill  (108  111.  560),  270. 
Donaghue  v.  Gaffy  (53  Conn.  43),. 

226. 
Donald  v.  Hewitt  (33  Ala.  534),  183. 
Donnell  v.  Harshe  (67  Mo.  170),  53. 
Douthit   V.  Duuthit  (133  Ind.  26), 

134. 
Dowling  v.  National  Bank  (145  U. 

S.  512),  174. 
Dressel  v.  Lonsdale  (46  III  Ap.  454), 

25. 
Drucker    v.    Wellhouse     (82     Ga. 

129),  5. 
Drumright  v.  Philpot  (16  Ga.  434), 

169. 
Dubois  V.  Jones  (34  Fla.  539),  71. 
Du  Bree  v.  Albert  (100  Pa.  St.  483), 

108. 
Dufif  V.  Maguire  (99  Mass.  300),  130. 
Dunham  v.  Loverock  (158  Pa.  St. 

197),  8,  37. 
Dunham  v.  Presby  (120  Mass.  285), 

19. 
Dunton  v.  Brown  (31  Mich.  182),  23. 
Durant  v.  Abendroth  (69  N.  Y.  148), 

313. 
Durant  v.  Pierson  (124  N.  Y.  444), 

245,  268. 
Duryea  v.  Whitcomb  (31  Vt.  393), 
43. 

Woodman  (9  Cush.  255), 


Dutton 
36. 


E. 


Eagle  v.   Bucher  (6  Ohio  St.  295), 

261. 
Eagle  Mfg.  Co.  v.  Jennings  (29  Kan. 

657),  276. 
Earon  v.  Mackey  (106  Pa.  St.  452) 

273. 
Eastman  v.  Clark  (53  N.  H.  276),  53. 
Easton   v.  Strother  (57  Iowa,  5U0), 

112. 
Eaton  v.  Walk-cr  (76  Mich.  579),  11. 


TABLE    OF    CASES. 


Keferences  are  to  sections. 


Edison  Ilium.  Co.  v.  De   Mott  (51 

N.  J.  Eq.  16),  291,  304 
Edwards  v.  Dillon  (147  111.  14),  180. 
Edwards  v.   Remington   (51   Wis. 

336),  140. 
Eiehbaum  v.  Irons  (6  "W.  &  S.  68),  7. 
Elder  v.  Hood  (38  111.  538),  146. 
Elkinton  v.  Booth  (143  Mass.  479), 

265. 
Ellis  V.  Allen  (80  Ala.  515),  186. 
Ellison  V.  Lucas  (87  Ga.  224),  124, 

289. 
Ellison  V.  Sexton  (105  N.  C.  856), 

263. 
Elmira  Iron  Co.  v.  Harris  (124  N.  Y. 

280),  265. 
Emerson  v.  Durand  (64  Wis.  Ill), 

119,  120. 
Emerson  v.  Senter  (118  U.  S.  3).  268. 
Emery  v.  Wilson  (79  N.  Y.  78),  142. 
England  v.  Curling  (8  Beav.  129), 

78,  81. 
Engler  v.  Offutt  (70  Md.  78),  206. 
Essel  V.  Hayward  (30  Beav.   158), 

255. 
Eustis  V.  Bolles  (146  Mass.  413),  2^17, 

259. 
Evans  v.  Bryan  (95  N.  C.  174),  217. 
Ewart  V.  Mercantile  Co.  ( —  Mo. 

),  289. 

Exchange  Bank  v.  Tracy  (77  Mo. 

594),  245. 


F. 


Fairchild   v.   Fairchild  (64  N.  Y. 

471),  109. 
Fairthorne  v.  Weston  (3  Hare,  887), 

256. 
Fancher  v.   Furnace  Co.  (80  Ala. 

481),  171. 
Farmers'   Ins.   Co.    v.   Malone   (45 

Neb.  302),  192. 
Earwell  v.   Huston  (151   111.   289), 

289. 


Farwell  v.  St.  Paul  Trust  Co.  (45 

Minn.  495),  123,  177. 
Faulkner  v.  Hyman  (142  Mass.  53),  4. 
Fay  V.  Burdett  (81  Ind.  440),  24. 
Fay  V.  Noble  (7  Cush.  192),  11. 
Fenn  v.  Bolles  (7  Abb.  Pr.  421),  86. 
Ferguson  v.  Baker  (116  N.  Y.  257), 

141. 
Fernald  v.  Clark  (84  Me.  284),  275. 
Finnegan  v.  Noerenberg  (52  Minn. 

239),  11. 
Fireman's  Ins.  Co.  v.  Floss  (67  Md. 

403),  228. 
First  Nat.  Bank  v.  Carpenter  (41 

Iowa,  518),  188. 
First   Nat.  Bank  v.  Cody  (93  Ga. 

127),  84. 
First    Nat.   Bank    v.   Conway   (67 

Wis.  210),  36,  169. 
First  Nat.  Bank  v.  Cringan  ( —  Va. 

— ),  34,  195. 
First  Nat.   Bank  v.  Freeman   (47 

]\Iich.  40S),  186. 
Fish  Bros.  Wagon  Co.  v.  Fish  (82 

Wis.  546),  86. 
Fisher  v.  Syfers  (109  Ind.  514),  289. 
Fitch  V.  Harrington  (13  Gray,  468), 

30. 
Fitzgerald  v.   Grimmell  (64  Iowa, 

261),  4,  85. 
Fitzpatrick  v.  Flanagan  (106  U.  S. 

648),  268. 
Flemyng    v.   Hector  (2  M,  &  W. 

172),  7. 
Fletcher  v.  Pullen  (70  Md.  205),  70, 

71,  72. 
Fletcher   v.   Reed  (131  Mass.  812), 

237. 
Fletcher  v.   Vandusen    (52    Iowa, 

448),  152. 
Flower  v.  Barnekoff  (20  Oreg.  137), 

17,  32,  48,  58. 
Fogg  V.  Johnston  (27  Ala.  482),  251. 
Folds  V.  Allardt  (35  Minn.  488),  23. 
Foot  V.  Goldman  (68  Miss.  529),  23. 


TABLE    OF    CASES. 


Beferences  are  to  sections. 


Forbes  v.  Webster  (2  Vt.  58).  r^5. 
Forsyth  v.  Woods  (11  Wall.  484). 

290. 
Frazer  v.  Frazer  Lubricator  Co. 

(121  111.  147),  86. 
Freeman  v.  Campbell  (55  Cal.  197), 

200. 
Freeman    v.   Freeman   (13G   Mass. 

-  200),  154. 
French  v.  Chase  (6  Me.  166),  299. 
French  v.  Styring  (2  C.  B.  357),  53. 
Friend  v.  Duryee  (17  Fla.  Ill),  174. 
Frost  V.  Erath  Cattle  Co.  (81  Tex. 

505),  170. 
Fry  V.  Potter  (12  R.  I.  542),  132. 
Fuller  V.  McHenry  (83  Wis.  573),  25. 
Fuller  V.  Percival  (126  Mass.  381), 

144. 
Fulton  V.  Central  Bank  (92  Pa.  St. 

112),  273. 
Fulton  V.  Hughes  (63  Miss.  61),  298. 

G. 


Sal- 


Gadsden  v.   Carson  (9    Rich.   Eq. 

252),  297. 
Gage  V.  Parmelee  (87  111.  339),  78. 
Galbraith  v.  Tracy  (153  111.  54),  106, 

109,  268. 
Gammon  v.  Huse  (100  111.  234),  78. 
Gartside  Coal  Co.  v.  Maxwell  (22 

Fed.  Rep.  197),  11. 
Gaston  v.  Drake  (14  Nev.  175),  18. 
Gavin  v.  Walker  (14  Lea,  643),  193. 
Gay  V.  Seibold  (97  N.  Y.  472),  83. 
Gay  V.  Waltman  (89  Pa.  453),  171. 
Gerard  v.  Bates  (124  111.  150),  100, 

154. 
Gerard  v.  Gateau  (84  111.  121),  256. 
Getchell  v.  Foster  (106  Mass.  42),  83. 
Gibbs'  Estate,  In  re  (157  Pa.  59),  3, 11. 
■Gibson  v.  Lupton  (9  Bing.  297),  9. 
Gilbert   v.    Liclitenberg   (98  Mich. 

417),  224. 
'Gilchrist  v.  Brande  (58  Wis.  184), 
175,  262. 

c  xxiii 


Gilkerson-Sloss  Com.   Co, 

inger  (56  Ark.  294),  25. 
Gilmore  v.  Ham  (142  N.  Y.  1),  273. 
Gilruth  V.  Decell  (72  Miss.  232),  206. 
Goddard-Peck  Grocery  Co.  v.  Mc- 

Cune  (122  Mo.  426),  288. 
Godfrey  v.  White  (43  Mich.  171), 

119. 
Goell  V.  Morse  (126  Mass.  480),  53. 
Goesele  v.  Bimeler  (14  How.  589),  15. 
Goldsmith  v.  Eichold  (94  Ala.  116), 

113.  124. 
Goldthwaite  v.   Janne}'  (102  Ala. 

431),  107,  110. 
Gould  V.  Kendall  (15  Neb.  197),  20. 
Grace  v.  Smith  (2  W.  Bl.  998).  56. 
Grafton  Bank  v.  Moore  (13  N.  H. 

99),  36. 
Gray  v.  Green  (142  N.  Y.  316),  271. 
Gray  v.  Hamil  (82  Ga.  375),  120. 
Gray  v.  Palmer  (9  Cal.  616),  15. 
Gray  v.  Ward  (18  111.  32),  174. 
Gray,  In  re  (HI  N.  Y.  404),  295. 
Green  v.  State  Bank  (78  Tex. 

243. 
Greene   v.  Butterworth   (45  N. 

Eq.  738),  293. 
Greenslade  v.  Dower  (7   Barn. 

Cr.  635),  174. 
Gregg  V.  Hood  (129  111.  613),  78. 
Gregg  V.  James  (Breese,  111.,  148), 

177. 
Griffith  \ 
Griswold 

169. 
Griswold  v.  Waddington  (15  Jolins. 

57,  16  id.  438),  259. 
Groth  V.  Payment  (79   Mich.  290), 

255. 
Grow  V.  Seligman  (47  Mich.  607),  86. 
Guice  V.  Thornton  (70  Ala.  460),  34. 
Guillon  V.  Peterson  (89  Pa.  St.  103), 

200. 
Gunn  V.  Railroad  Co.  (74  Ga.  509), 

20. 


2). 


& 


Buffum  (22  Vt.  181),  197. 
V.  Haven  (25  N.  Y.  595), 


TABLE   OF   CASES. 


Heferences  are  to  sections. 


H. 


Hackett  v.  Multnomah  Ry.  (12  Oreg. 

124),  26. 
Hackett  v.  Stanley  (115  N.  Y.  625), 

50.  61. 
Haddock  v.  Grinnell  Mfg.  Co.  (109 

Pa.  St.  372),  313. 
Hage  V.  Campbell  (78  Wis.  572),  183, 

287.  288. 
Hagenbeck  v.  Arena  Co.  (59  Fed, 

Rep.  14),  53. 
Hahlo  V.  Mayer  (102  Mo.  93),  70. 
Hale  V.  Spaulding  (145  Mass.  482), 

212. 
Hale  V.  Wilson  (112  Mass.  444),  145. 
Haley  v.  Case  (142  Mass.  316),  204. 
Hall  V.  Clagett  (48  Md.  223),  116. 
Hall  V.  Kimball  (77  111.  161),  147. 
Hall  V.  Lanning  (91  U.  S.  160),  187. 
Hamilton,  In  re  (1  Fed.  Rep.  800), 

27,  296. 
Hanchett  v.  Gardner  (138  111.  571), 

185. 
Haney  Mfg.  Co.  v.  Perkins  (78  Mich. 

1),  204. 
Hanna  v.  Flint  (14  Cal.  73),  50. 
Hannaman   v.   Karrick    (9    Utah, 

330),  119. 
Harris  v.  Baltimore  (73  Md.  22),  174, 

175. 
Harris  v.  Harris  (153  Mass.  439),  105. 
Harris  v.  Peabody  (73  Me.  262),  295. 
Harris  v,  Lloyd  (11  Mont.  390),  29. 
Harris  v.  Visscher  (57  Ga.  229),  5. 
Harrison  v.  Tennant  (21  Beav.  482), 

255. 
Hartnian  v,  Woehr  (18  N.  J,  Eq. 

383).  14. 
Harvey  v.  Adams  (32  Mich.  472), 

187. 
Harvey  v.  Childs  (28  Ohio  St.  819), 

50,  64. 
Harvey  v.  McAdams  (33  Mich,  472), 

170. 


Haslet  V.  Street  (2  McCord,  310),. 

187. 
Hastings    Nat.   Bank  v.   Hibbard 

(48  Mich.  452).  202. 
Hatch  V.  Wood  (43  N.  H.  633),  239. 
Hatchett  v.  Blanton  (72  Ala.  423), 

105,  217, 
Haven   v.  Wakefield  (39  111.   509), 

147. 
Hawkins  v.  Mclntyre  (45  Vt.  496), 

53. 
Hawn  v.  Land  Co.  (74  Cal.  418),  178. 
Hayes  v.  Bement  (3   Sandf.    394), 

147, 
Haynes  v.  Carter  (12  Heisk.  7).  263. 
Heartt  v.  Walsh  (75  111.  300),  176, 

271. 
Heath  v.  Waters  (40  Mich.  457),  119, 

268. 
Hendren  v.  Wing  (60  Ark.  561),  84. 
Hendry  v.  Turner  (32  Ch.  Div.  355), 

264. 
Henkel  v.  Heyman  (91  111.  96),  313. 
Henning  v.   Raymond  (35    Minn. 

303),  156. 
Henry  v.  Anderson   (77   Ind.  361), 

108. 
Herbert  v.  Davis  (40  Mich.  546),  184. 
Hess  V.  Lowrey  (122  Ind.  225),  204. 
Hier  v.  Kaufman  (134  111.  215),  179. 
Hill  V.  Draper  (58  Ark.  625),  287, 

288. 
Hill  V.  Palmer  (56  Wis.  123),  136. 
Hill  V.  Postley  (90  Va,  200),  172. 
Hillcock  V.  Traders'  Ins,   Co.  (54 

Mich.  531),  182. 
Hilliker  v.  Loop  (5  Vt.  116),  223. 
Hilton  V,  Vanderbilt  (82  N,  Y.  591), 

273. 
Hoare  v.  Dawes  (1  Doug.  371),  9. 
Hobbs  V.  Wilson  (1  W.  Va.  50),  274. 
Hocking  v.  Hamilton  (158  Pa.  St. 

107),  180. 
Hodge  V,  Twitchell  (33  Minn,  389).- 

112. 


TABLE    OF   CASES. 


Heferences  are  to  sections. 


Hoeflinger  v.  Wells  (47  Wis.  628), 

196. 
Holbrook  v.  Nesbitt  (163  Mass.  120), 

86. 
Holladay  v.  Elliott  (8  Oreg.  84),  255, 

257. 
Holmes  v.  McCray  (51  Ind.  358),  32. 
Helton  V.  Holton  (40  N.  H.  77),  297. 
Holton  V.  McPike  (27  Kan.  286),  184. 
Homfray  v.  Fotbergill  (1  Eq,  567), 

149. 
Hookham  v.  Pottage  (8  Cb.  Ap.  91), 

86. 
Hooper  v,  Lusby  (4  Camp.  66).  182. 
Horn  V.  City  Bank  (32  Kan.  518), 

174. 
Horton  v.  Bloedorn  (37  Neb.  666;, 

183. 
Horton  Mfg.  Co.  v,  Horton   Mfg.    Jackson   v.  Cornell  (1  Sandf.  Cb. 

Co.  (18  Fed.  Rep.  816),  87.  I         348),  297. 

Hoskinson  v.  Eliot  (62  Pa.  St.  393),  '  Jackson  v.  Labee  (114  111.  287),  156, 


Hj-nes  V.  Stewart  (10  B.  Men.  429)' 

251. 
Hyre  v.  Lambert  (87  W.  Va.  26), 

119. 
Hyrne  v.  Erwin  (23  S.  C.  226),  204. 

I. 

Iddings  V.  Pierson  (100  Ind.  418), 

209. 
Insley  v.  Sbire  (54  Kan.  793),  114. 
Irvin  V.  Railroad  Co.  (92  111.  103),  53, 

54. 
Irwin  V.  Williar  (110  U.  S.  499),  165. 
Ivy  V.  Walker  (58  Miss.  253),  133. 


175. 
Howe   V.  Lawrence   (9  Cusb.  553), 

295,  298. 
Howe  V.  Sbaw  (56  Me.  291).  212. 
Howell  V.  Harvey  (5  Ark.  270),  237, 

251. 
Howze  V.  Patterson   (53  Ala.  205), 

48.  174,  175. 
Hoxie  V.  Cbaney  (143  Mass.  592),  88. 
Huiskamp  v.   Moline  Wagon  Co. 

(121  U.  S.  310),  289. 
Hull  V.  Young  (30  S.  C.  121),  180. 
Humes  v.  O'Bryan  (74  Ala.  64),  165. 
Humpbries  v.  Cbastain  (5  Ga.  166), 

272. 
Hundley  v.  Farris  (103  Mo.  78),  124, 

288,  293. 
Hunt  v.  Rogers  (7  Allen,  409),  274. 
Hunter   v.  Pfeiffer   (108   Ind.  197), 

18,  20. 
Hurt  V.  Salisbury  (55  Mo.  310),  11. 
Hutcbinson  v.  Dubois  (45  Micb.  143), 

100. 
Hutzk-r  V.  I'liiliips  (26  S.  C.  136),  294. 


Jackson  v.  McLean  (100  Mo.  130),  20. 
Jacobs  V.  Sborey  (48  N.  H.  100),  31, 

204. 
Jaffe  V.  Krum  (88  JIo.  609).  315. 
Jaflfrey  V.  Jennings  (101  Micb.  515),. 

204,  215. 
Janney  v.  Springer  (78  Iowa,  617), 

123,  185. 
Jarvis  v.  Brooks  (27  N.  H.  37),  280. 
Jennings  v.  Baddeley  (3  K.  &  J.  78), 

257. 
Jewett  v.  Meecb  (101  Ind.  289),  287. 

288. 
Jobnson  v,  Bernbeim  (76  N.  C.  139), 

163. 
Jobnson  v.  Clark  (18  Kan.  157),  106. 
Jobnson  v.  Robinson  (68  Tex.  399), 

185. 
Jobnson  v.  Young  (20  W.  Va.  614). 

275. 
Jobnson's  Appeal  (115  I'a.  St.  129), 

112. 
Jobiiston   v.  Duttoii   (27   Ala.   245), 

IC.ii,    IS'.I. 


TABLE    OF   CASES. 


References  are  to  sections. 


Johnston  v.  Trask  (116  N.  Y.  136), 

176. 
Jones  V.  Aspen  Hardware   Co.  ( — 

Col.  ),  11. 

Jones  V.  Blun  (145  N.  Y.  333),  5. 
Joues  V.  Dexter  (130  Mass.  380),  112. 
Jones  V.  Lloyd  (18  Eq.  265),  261. 
Jones  V.  Noj'  (2  M.  &  K.  125),  254. 
Jones  V.  Walker  (103  U.  S.  444),  269. 
Jordan  v.  Miller  (75  Va.  442),  188. 
Judge  V.  Braswell  (13  Bush,  Ky., 

67),  174. 


"Kahn  v.  Smelting  Co.  (102  U.  S. 

641),  29. 
Kaiser  v.  Savings  Bank  (56  Iowa, 

104),  11. 
Katz  V.  Brewington  (71  Md.  79), 

118. 
Kelley  ^^  Bourne  (15  Oreg.  476),  84. 
Keilogg  V.  Moore  (97  IlL  282),  140. 
Kelly  V.  Greenleaf  (3  Story,  U.  S. 

a  C,  105),  116. 
Kendall  v.  Hamilton  (4  App.  Cas. 

504),  209,  210. 
Kennedy  v.  McFaddon  (3  H.  &  J., 

Md.,  194),  127. 
Kenney  v.  Altvater  (77  Pa.  34),  170. 
Kepler  v.  Saving  &  L.  Co.  (101  Pa. 

St  602),  110. 
Kerrick  v.  Stevens  (55  Mich.  167), 

34. 
Ketchum  v.  Durkee  (1  Barb.  Ch. 

480),  298. 
Kimberly  v.  Arms  (129  U.  S.  512), 

112. 
King  V.  Chuck  (17  Beav.  325),  149. 
King  V.  White  (63  Vt.  158),  399. 
King  V.  Winants  (71  T^.  C.  469),  18. 
Kinney  v.  Maher  (156  Mass.  252), 

120. 
Kirby  v.  Schoonmaker  (3  Barb.  Ch. 

46),  281. 
.Knapp  V.  Edwards  (57  Wis.  181),  116. 


Knard  v.  Hill  (102  Ala.  570),  71. 
Knoedler  v.  Glaenzer  (12  U.  S.  Ap. 

336),  89. 
Kruschke  v.  Stefan  (83  Wis.  373), 

95,  108. 
Kuhn  v.  Weil  (73  Mo.  213),  187. 
Kurner  v.  O'Neil  (39  W.  Va.  515); 

287,  288. 
Kutz  v.  Driebelbis  (126  Pa.  335),  132. 


Ladd  v.  Griswold  (4  Gilm.  25),  283. 
Ladiga  Saw  Mill  Co.  v.  Smith  (78 

Ala.  108),  85. 
Lafond  v.  Deems  (81  N.  Y.  507),  7. 
Lament  v.  Fullam  (133  Mass.  583), 

53. 
Lane  v.  Bishop  (65  Vt.  575),  25. 
Lanier  v.  McCabe  (2  Fla.  82),  174. 
Lassiter  v.  Jackman  (88  Ind.  118), 

120. 
Lathrop  v.  Adams  (133  Mass.  471), 

204. 
Latta  V.  Kilbourn  (150  U.  S.  524),  34, 

112,  113. 
Lawrence  v.  Clark  (9  Dana,  Ky., 

257),  127. 
Leavitt  v.  Peck  (3  Conn.  125),  158, 

163. 
Lee  V.  First  National  Bank  (45  Kan. 

8),  162,  174. 
Lee  V.  Hamilton  (12  Tex.  413),  177. 
Leffler  v.  Rice  (44  Ind.  103),  175. 
Leggett  v.   Hyde  (58  N.   Y.  272), 

50,  61. 
Leithauser  v.  Baumeister  (47  Minn. 

151),  275. 
Le  Page  v.  Russia  Cement  Co.  (51 

Fed.  Rep.  941),  86. 
Le  Roy  v.  Johnson  (2  Pet.  186),  83. 
Letts-Fletcher  Co.  v.  McMaster  (83 

Iowa,  449),  183. 
Levi  V.  Latham  (15  Neb.  509),  174. 
Levine    v.   Michael   (35   La.   Ann. 

1121),  152. 


TABLE    OF   CASES. 


References  are  to  sections. 


Lewis  V.  Langdon  (7  Sim.  421),  86. 
Lieb  V.  Craddock  (87  Ky.  525),  37, 

265. 
Ligare  v.  Peacock  (109  111.  94),  119, 

236. 
Lincoln  v.  Craig  (16  R.  L  564),  70. 
Lindsay  v.  Race  (103  Mich.  28),  106. 
Lineweaver  v.  Slagle  (64  Md.  465), 

312,  313. 
Lingen  v.  Simpson  (1  S.  &  S.  600), 

149. 
Litt'e  V.  Caldwell  (101  Cal.  553),  26^ 
Livingston  v.  Roosevelt  (4  Johns. 

251),  161. 
Lobeck  v.  Hardware  Co.  (37  Neb. 

158),  87. 
Locke  V.  Lewis  (124  Mass.  1),  193. 
Locke  V.  Stearjis  (1  Mete.  560),  C04. 
Lockwood   V.   Beckwith   (6  Mich. 

168),  113. 
Lodge  V.  Fendal  (1  Ves.  166),  296. 
Loeb  V.  Pierpoint  (58  Iowa,  469), 

172. 
Logan    V.   Trayser  (77   Wis.    579), 

127. 
Long  V.  Garnett  (59  Tex.  229),  262. 
Lord  V.  Baldwin  (6  Pick.  348),  299. 
Loudon  Savings  Society  v.  Savings 

Bank  (36  Pa.  St.  498),  166. 
Louisville  R.  Co.  v.  Alexander  (— 

Ky.  — ),  25. 
Love  V.  Blair  (72  Ind.  281),  85. 
Love  V.  Payne  (73  Ind.  80),  29. 
Lovejoy  v.  Lovett  (124  Mass.  270), 

76. 
Lovejoy  v.  Spafford  (93  U.  S.  430), 

263. 
Lovell  v.  Beauchamp  (94  App.  Cas. 

607),  23. 
Lowman  v.  Sheets  (124  Ind.  417), 

186. 
Loyd,  In  re  (23  Fed.  Rep.  88),  295. 
Luddington  v.  Boll  (77  N.  Y.  138), 

196. 
Lymau  v.  Lyman  (3  Paine,  11),  15. 


Lynch  v.  Thompson  (61  Miss.  354X. 

176. 
Lyon  v.  Knowles  (3  B.  &  S.  556),  53. 
Lyons  v.  Murray  (95  Mo.  23),  125. 

M. 

Maffett  v.  Leuckel  (93  Pa.  St.  4G8), 

196. 
Magovern  v.  Robertson  (118  N.  Y. 

61),  50. 
Mair  v.  Glenn :e  (4  ?!.  &  a  240),  53. 
Major  V.  Hawkes  (13  III.  29S).  177. 
Major  V.  Todd  (84  Mich.  85),  119. 
Mallory  v.   Oil  Works    (86  Tenn. 

598),  26. 
Mallory  v.  Russell  (71  Iowa,  63),  109. 
Manhattan  Co.   v.   Lai m beer  (108 

N.  Y.  578),  313. 
Manning  v.  Williams  (3  Mich.  105X 

270. 
Marble  Co.  v.  Ripley  (10  Wall.  339X 

152. 
Marlatt  v.  Jackman  (3  Allen,  287), 

259. 
Marshall  v.  Pinkham  (53  Wis.  585), 

86. 
Marsh's  Appeal  (69  Pa.  St.  30).  11. "i. 
Martin  v.  Morris  (63  Wis.  418),  109. 
Mason  v.  Connell  (1   Whart.  381). 

340. 
Mason  v.  Eldred  (6  Wall.  231),  210. 

211. 
Mayberry  v.  Willoughby  (5  Neb. 

368),  373. 
Mayer  v.  Bernstein  (69  Mks.  17), 

173. 
McCarthy  v.  Seisler  (130  Ind.  03), 

183. 
McCoy  v.  Brennan  (01  Mich.  363), 

317. 
McDonald  v.  Kgglcston  (26  Vt.  1.54), 

180. 
McDonnell  v.  Battle  House  Ca  (67 
A  la.  90),  50,  53. 


XXVll 


TABLE   OF    CASES. 


References  are  to  sections. 


nvIcFadden  v.  Hunt  (5  W.  &  S.  468), 

147. 
McFadden   v.  Leeka   (48  Ohio   St. 

513),  125. 
McGowcin  Co.  v.  McGowan  (23  Ohio 

St.  370),  153. 
McLain  v.  Carson  (4  Ark.  164),  370. 
McNeely  v.  Haynes  (76  N.  C.  132), 

205. 
McNeil  V.  Congregational  Society 

(66  Cal.  105),  110. 
Mead  v.  Shepard  (54  Barb.,  N.  Y., 

474),  170. 
Meador  v.  Hughes  (14  Bush,  652), 

27. 
Mechanics'  Ins.  Co.  v.  Richardson 

(33  La.  Ann.  1308),  174. 
Meech  v.  Allen  (17  N.  Y.  300),  300. 
Meehan  v.  Valentine  (145  U.  S.  611), 

4,  66. 
Mehlhop  V.  Rae  (90  Iowa,  30),  23. 
Menage  v.  Burke  (43  Minn.  211),  84. 
Menagh  v.  Whitwell  (52  N.  Y.  146), 

97,  98,  288. 
Meneely  v.  Meneely  (62  N.  Y.  427), 

85. 
Meriden   Nat.    Bank  v.  Gallaudet 

(130  N.  Y.  398),  83. 
Merriwether  v.  Hardeman  (51  Tex. 

436),  309. 
Merry  v.  Hoopes  (111  N.  Y.  415),  88. 
Metcalfe  v.  Bradshaw  (145  111.  134), 

79,  113. 
Metcalfe  v.  Rycroft  (6  M.  &  S.  75), 

334. 
Meyer  v.  Krohn  (114  111.  574),  37-30, 

363. 
Mickle  V.  Peet  (43  Conn.  65),  130. 
Miles  Co.  V.  Gordon  (18  Wash.  443), 

53. 
Miller  v.  Bagley  (19  Oreg.  539),  140. 
Miller  v.  Estill  (5  Ohio  St.  508).  383. 
Miller  v.  Hughes  (1  A.  K.   Marsh. 

181),  57. 
Miller  v.  Rapp  (135  Ind.  614),  30. 


Miller  v.  Sims  (3  Hill,  479),  33. 
Mitchell  V.  O'Neale  (4  Nev.  504),  33, 
Mitchell  V.  Reed  (61  N.  Y.  133),  113. 
Mix  V.  Shattuck  (50  Vt.  431),  3G0. 
Mokelumne  Hill  Min.  Co.  v.  Wood- 
bury (14  Cal.  424),  11. 
Mollwo  V.  Court  of  Wards  (4  Pr. 

Coun.  419),  61. 
Monroe  v.  Conner  (15  Me.  178),  163. 
Monroe  v.  Ezzel  (11  Ala.  603),  333. 
Moody  V.  Lucier  (63  N.  H.  584),  393. 
Moreau  v.  Saffarans  (3  Sneed,  595), 

84. 
Morehouse  v.  Northrop  (33  Conn. 

380),  204. 
Morey  v.  Grant  (48  Mich.  336),  156. 
Morgan  v.  Farrel  (58  Conn.  413),  35, 

50,  70,  71,  72. 
Morgan  v.  Richardson  16  Mo.  409), 

179. 
Morgan  v.  Schuyler  (79  N.  Y.  490), 

86. 
Morgan  v.  Stearns  (41  Vt.  397),  50. 
Morrill  v.  Bissell  (99  Mich.  409),  366. 
Morris  v.  Griffin  (83  Iowa,  327),  120. 
Morris  v.  Kearsley  (2  Y.  &  C.  139), 

149. 
Morris  v.  Peckham  (51  Conn.  128), 

32,  150. 
Morris   Run   Coal   Co.  v.   Barclay 

Coal  Co.  (68  Pa.  St.  173),  26. 
Morrison  v.  Blodgett  (8  N.  H.  238). 

100,  112. 
Morrison    v.    Moat   (9    Hare,   341), 

149. 
Morse  v.  Hutchins  (103  Mass.  439), 

145. 
Munson  v.  Sears  (12  Iowa,  173),  53. 
Murphy  v.  Crafts  (13  La.  Ann.  519), 

115. 
Murrill  v.  Neill  (8  How.  414),  293. 
Musselman's  Appeal  (62  Pa.  St.  81), 

88. 
Mycock  V.  Beatson  (13  Ch.  D.  384), 

251. 


TABLE    OF   CASES. 


Heferences  are  to  sections. 
'3Iyers  v.  Kalamazoo  Buggy  Co.  (54    Noyes    v.   New  Haven    R.   R.  (30 


Mich.  215),  86. 
.Myers  v.  Tyson  (—  Kan.  — ),  289. 


X, 


Va, 


National  Bank  v.  Cringan  ( 

),  34,  195. 

National  Union  Bank  v.  National 

Mechanics'  Bank  (80  Md.  371), 

107,  110. 
Neal  V.  Berry  (86  Me.  193),  23. 
.Neale  v.  Turton  (4  Bing.  149),  174. 
Neil  V.  Greenleaf  (26  Ohio  St.  567), 

142. 
Neluis  V.  McGraw  (93  Ala.  245).  53. 
Nelson  v.  Hill  (5  How.  127),  270. 
New  V.  Wright  (44  Miss.  202),  152, 

155. 
Newbigging  v.  Adam  (34  Ch.  Div. 

582),  251. 
Newby  v.  Harrell  (99  N.  C.  149), 

130. 
Newell  V.  Cochran  (41  Minn.  374), 

112. 
Newman  V.  Bagley  (16  Pick.  570), 

297. 
Newmarket  Nat.  Bank  v.  Locke  (89 

Ind.  428),  293. 
Newsom  v.  Pitman  (98  Ala.  526), 

14G. 
New  York  Ins.  Co.  v.  Bennett  (5 

Conn.  574),  188. 
Nicholson  v.  Moog  (G8  Ala.  471),  262. 
Nirdlinger  v.  Bernheimer  (133  N.  Y. 

45).  30. 
Nixon  V.  Nash  (12  Ohio  St.  647),  100. 
North  V.  Bloss  (30  N.  Y.  374).  229. 
North  V.  Mudge  (13  Iowa,  469),  179. 
North  Penn.  Coal  Co.'s  Appeal  (45 

Pa.  St.  181),  196,  198. 
North  Star  Co.  v.  Stebbins  (3  S. 

Dak.  540),  202. 
.Norwalk  Nat.  Bank  v.  Sawyer  (38 

Ohio  St.  338),  llU. 


Conn.  1),  163, 178. 
Nussbaumer  v.  Becker  (87  111.  281), 
265. 

o. 

O'Brien  v.  Smith  (42  Kan.  49),  130. 
Oliphant  v.  Markham  (79  Tex.  543), 

183. 
Oliver  v.  Forrester  (96  111.  315),  268. 
Olson  V.  Morrison  (29  Mich.  395),  298. 
Osburn  v.  Farr  (42  Mich.  134),  23. 
Oteri  V.  Scalzo  (145  U.  S.  578),  251, 

253. 

P. 

Page  V.  Brant  (18  111.  37),  229. 
Page  V.  Cox  (10  Hare.  163),  149. 
Page  V.  Thomas  (43  Ohio  St.  38),  106. 
Paige  V.  Paige  (71  Iowa,  318),  105, 

109. 
Palmer  v.  Dodge  (4  Ohio  St.  21),  273. 
Pape  V.  Cole  (55  N.  Y.  124),  270. 
Parchen  v.  Anderson  (5  Mont.  438), 

50,  68. 
Parker  v.  Bowles  (57  N.  H.  491),  106, 

107. 
Parker  V.  Macomber(18  Pick.,  Mass., 

505),  133. 
Patterson  v.  Ware  (15  Ala.  444),  158. 
Patton  V.  Leftwich  (86  Va.  421),  268. 
Payne  v.  Thompson  (44   Ohio  St. 

192).  2.5. 
Peacock  v.  Peacock  (16  Ves.  49).  98, 
Pearson  v.  Keedy  (6  B.  I\lon.  128), 

270,  278. 
Pease  v.  Cole  (53  Conn.  32),  162, 174. 
Pelletier  v.  Couture  (148  Mass.  269), 

23. 
Pennington  v.  Todd  (47  N.  J.  Eq. 

569),  153. 
Pennoyer  v.   David  (H    :\Iich.  407), 

272. 
People  V.  Suj^.ir  IvL'tiiiing  Co.  (121 

N.  Y.  r,H-2).  26. 


TABLE    OF   CASES. 


References  are  to  sections. 


Peoria   Ins.  Co.  v.  Hall   (12  Mich. 

202),  182. 
Pepper  v.  Peck  (17  R.  I.  55),  289. 
Pepper  v.  Thomas  (85  Ky.  539),  106. 
Perkins  v.  Butler  Co.  (44  Neb.  110), 

271. 
Peters  v.  Bain  (133  U.  S.  G70),  293. 
Peterson  v.  Humphrey  (4  Abb.  Pr. 

394),  86. 
Peterson  v.  Roach  (32  Ohio  St.  374), 

195. 
Pettyjohn  v.  Woodruff  (86  Va.  478), 

294, 
Pettyt  V.  Janeson  (6  Madd.  146),  77. 
Peyton  v.  Lewis  (12  B.  Mon.  356), 

274. 
Pfeuffer  v.  Maltby  (54  Tex.  454),  153. 
Phelps  V.  Brewer  (9  Cush.  390),  187. 
Phelps  T.  McNeely  (66  Mo.  555),  288. 
Phillips  V.  Furniture   Co.  (86   Ga. 

699),  183. 
Phillips  V.  Phillips  (49  111.  437).  3. 
Phillips  V.  Reeder  (18  N.  J.  Eq.  95), 

233. 
Phillips  V.  Trezevant  (67  N.  C.  370), 

155. 
Pickels  V.  McPherson  (59  Miss.  216), 

165. 
Pico  V.  Cuyas  (47  Cal.  174),  130. 
Pierce  v.  Jackson  (6  Mass.  242),  289. 
Pierce  v.  Scott  (37  Ark.  308),  116. 
Pierson  v.  Hooker  (3  Johns.,  N.  Y., 

68),  178. 
Pirtle  V.  Penn  (3  Dana,  247),  152. 
Pitkin  V.  Benfer  (50  Kan.  108),  265. 
Planters'  Bank  v.  Padgett  (69  Ga. 

159),  11. 
Polk  V.  Oliver  (56  Miss.  566),  263. 
Pollard  V.  Stanton  (7  Ala.  761),  51. 
Pomeroy  v.  Benton  (72  Mo.  64),  116. 
Pond  V.  Kimball  (101  Mass.  105),  217. 
Pooley  T.  Driver  (5  Ch.  Div.  458),  1, 

4,61. 
Pooley    v.   Whitmore    (10   Heisk., 

Tenn.,  629),  174. 


Porter  v.  Curry  (50  111.  319),  176. 
Post  V.  Kimberly  (9  Johns.  470),  44. 
Potter  V.  Greene  (9  Gray,  309),  36. 
Pratt  V.  Langdon  (97  Mass.  97),  57. 
Prentice  v.  Elliott  (72  Ga.  154),  121, 

177. 
Prentiss  v.  Sinclair  (5  Vt.  149),  266. 
Price  V.  Alexander  (2  Greene.  Iowa, 

427),  180. 
Price  V.  Spencer  (7  Phila.  178),  147. 
Prince  v.  Crawford  (50  Miss.  344), 

174. 
Prosser  v.  Hartley  (35  Minn.  340), 

217. 
Pullen  V.  Whitfield  (55  Ga.  174), 

270. 
Pulliam  V.  Schimpf  (100  Ala.  362), 

53. 
Purple  V.  Farrington  (119  Ind.  164), 

124,  289. 
Purvines  v.  Champion  (67  111.  459), 

142. 
Putnam  v.  Wise  (1  Hill,  234),  53. 

Q. 

Quackenbush  v.  Sawyer  (54  Cal. 
439).  53. 

Queen  v.  Robson  (16  Q.  B.  Div.  137), 
1,3. 

Queen  City  Furniture  Co.  v.  Craw- 
ford (127  Mo.  356),  34. 

Quinn  v.  Quinn  (81  Cal.  14),  49. 

E. 


Railsback  v.  Lovejoy  (116  111.  442),. 

112. 
Ralston  v.  Moore  (105  Ind.  243),  270. 
Rammelsberg  v.  Mitchell  (29  Ohio 

St.  22),  89. 
Randolph  v.  Daly  (16  N.  J.  Eq.  313).. 

215. 
Ransom  v.  Vande venter  (41  Barb^ 

307),  288. 

XX 


TA15LE    OF   CASES. 


Heferences  are  to  sections. 


Ratzer  v.  Ratzer  (28  N.  J.  Eq.  136),  3. 
Raymond  v.  Putnam  (44  N,  H.  160), 

27. 
Raymond  v.  Vaughn  (128  111.  256), 

246,  254. 
Read  v.  Bailey  (3  App.  Cas.  94),  296. 
Read  v.  Smith  (60  Tex.  579).  20. 
Redenbaugh  v.  Kelton  ( — Mo.  — ), 

195. 
Redfield  v.  Gleason  (16  Vt.  220),  119. 
Redlon  v.  Churchill  (73  Mo.   146), 

174,  188. 
Reed  v.  Cramer  (111  Pa.  St.  482),  36. 
Reed  v.  Meagher  (14  Colo.  335),  13, 

34. 
Reid  V.  Hollinshead  (4  B.  &  C.  867), 

9,  193. 
Remington  v.  Allen  (109  Mass.  47), 

130. 
Reyburn  v.  Mitchell  (106  Mo.  365), 

124,  287,  288. 
Reynell  v.  Lewis  (15  M.  &  W.  517), 

12. 
Reynolds  v.  Cleveland  (4  Cow.  282), 

197. 
Rice  V.  Barnard  (20  Vt.  479),  15,  289. 
Rice  V.  Culver  (32  N.  J.  Eq.  601), 

145. 
Richards  v.  Butler  (65  Ga.  593),  263. 
Richards  v.  Grinnell  (63  Iowa,  44), 

32. 
Richards  v.  Todd  (127  Mass.  167), 

251. 
Richardson  v.  Farmer  (30  Mo.  35), 

193. 
Richardson  v.  Gregory  (126  111.  166), 

236. 
Richardson  v.  Hughitt  (70  N.  Y. 

55),  50. 
Riddle  v.  Whitehill  (135  U.  S.  621), 

105. 
Riedeburg  v.  Schmitt  (71  Wis.  044), 

30. 
Ringo  v.  Wing  (49  Ark.  457).  219. 
Ripley  v.  Colby  (23  N.  H.  438),  83. 


Robards   v.  Waterman  (96  Mich. 

233),  183. 
Robbins  v.  Laswell  (27  111.  305),  51, 

52. 
Roberts  v.  Eldred   (73    Cal.    394), 

106. 
Roberts  v.  Johnson  (58  N.  Y.  613), 

212. 
Roberts  v.  McKee  (29  Ga.  161),  152. 
Robertson    v.    Corsett    (39    Mich. 

777),  4. 
Robinson  v.  Anderson  (20  Beav.  98), 

98. 
Robinson  v.  Bullock  (58  Ala.  618), 

53. 
Robinson  v.  Floyd  (159  Pa.  St.  165), 

262. 
Robinson  v.  Magarity  (28  111.  423), 

83. 
Robinson  v.  Simmons  (146  Mass. 

167),  119,  269. 
Robinson  Bank  v.  Miller  (153  111. 

244),  106,  107,  109. 
Roby  V.  Colehour  (135  111.  300),  112. 
Rodgers  v.   Meranda  (7   Ohio  St. 

180),  293. 
Rogers  v.  Batterton  (93  Tenn.  630), 

123. 
Rogers  v.  Rogers  (53  Conn.  121),  85. 
Rolfe  v.  Dudley  (58  Mich.  208),  187. 
Rose  V.  Coffield  (53  Md.  18),  202. 
Rosecrans  v.  Barker  (115  111.  331), 

187,  205. 
Rosenfield  v.  Haight  (53  Wis.  260), 

50. 
Rosenstein  v.  Burns  (41  Fed.  Rep. 

841),  253,  255,  257. 
Ross  V.  Henderson  (77  N.  C.  170), 

106. 
Rothwell    V.   Humphreys    (1   Esp. 

400),  175. 
Rovclsky    V.  Brown   (92   Ala.  522), 

10!). 
Rullnir   V.   Hewitt  (7  W.  Va.  58j), 

271. 


TABLE    OF    CASE8- 


Beferences  are  to  sections. 


IBumeiy  V.  McCulloch  (54  "Wis.  565), 

172. 
Rumsey  v.  Briggs  (139  N.  Y.  333), 

201. 
Russel  V.  Annable  (109  Mass.  72), 

180. 
Russell  V.  McCall  (141  N.  Y.  437), 

268. 
Russia  Cement  Co.  v.  Le  Page  (147 

Mass.  206),  85,  86. 
Rutherford  v.  Hill  (22  Oreg.  218),  11. 
Ryder  v.  Wilcox  (103  Mass.  24),  142. 

s. 

Sailors  v.  Nixon- Jones   Co.  (20  111. 

Ap.  509),  41. 
Salinas  v.  Bennett  (33  S.  C.  285),  23. 
Salmon  v.  Davis  (4  Binn.,  Pa.,  375). 

177. 
Sangston  v.  Haek  (52  Md.  173),  79. 
Saunders  v.  Reilly  (105  N.  Y.  18), 

287. 
Sawyer  v.   First  Nat.    Bank  (114 

N.  C.  13),  50. 
Sayer  v.  Bennet  (1  Cox,  107).  254. 
Scarlett  v.  Snodgrass  (92  Ind.  262), 

25. 
Schmidlapp  v.  Currie(55  Miss.  597), 

287,  288. 
Schmidt  v.  Archer  (113  Ind.  365), 

245. 
Schneider  v.  Sansom  (62  Tex.  201), 

186. 
Scott  V.   Campbell   (30    Ala.   7£8), 

138. 
Scott  V.  Goodwin  (1 B.  &  P.  67),  224. 
Scudder  v.  Ames  (89  Mo.  496),  78. 
Seabury  v.  Crowell  (51  N.  J.  L.  103), 

72. 
Seaman  v.  Ascherman  (57  Wis.  547), 

180. 
Sears  v.  Starbird  (78  Cal.  225),  137. 
Seattle  Board  of  Trade  v.  Hay  den 

(4  Wash.  263),  25. 


Second  Nat.  Bank  v.  Burt  (93  N. 

Y.  233),  290. 
Seeley  v.  Michell  (85  Ky.  508),  110. 
Seger's  Sons  v.  Thomas  Bros.  (107 

Mo.  635),  288. 
Seighortner  v.  "Weissenborn  (20  N. 

J.  Eq.  172),  255. 
Selden  v.   Hall  (21  Mo.   Ap.  452), 

313. 
Seldner  v.  Mt.  Jackson  Bank  (66 

Md.  488),  271. 
Setzer  v.  Beale  (19  W.  Va.  274),  30. 
Sexton  V.  Anderson  (95  Mo.  381), 

287. 
Seymour  v.  Harrow  Co.  (81   Ala. 

250),  83. 
Seymour  v.  Railroad  Co.  (106  U.  S. 

320),  223. 
Shanks  v.  Klein  (104  U.  S.  18),  105. 

111. 
Shannon  v.  Wright   (60  Md.  520), 

152,  155. 
Sharp  V.  Hutchinson  (100  N.  Y.  533), 

315. 
Shattuck  \.  Chandler  (40  Kan.  516), 

172,  268. 
Shaver  v.  Shaver  (54  Iowa,  208),  86. 
Shea  V.  Donahue  (15  Lea,  160),  92, 

308. 
Sheble  v.  Strong  (128  Pa.  St.  315), 

313. 
Sheppard  v.  Boggs  (9  Neb.  257),  89. 
Sheridan  v.  Medara  (2  Stockt.  469), 

57. 
Sherman  v.  Kreul  (42  Wis.  33),  270. 
Sherwood  v.  Snow  (46  Iowa,  481), 

174,  175.  188. 
Shirk  V,  Shultz  (113  Ind.  571),  23. 
Sibley  v.  Parson  (93  Mich.  538),  262. 
Siegel  V.  Chidsey  (28  Pa.   St.  279), 

195,  196,  247. 
Silletoe,  Ex  parte  (1  G.  &  J.  374), 

391,  296. 
Simonton   v.  McLain  (37  La.  An. 

663),  27. 


TABLE    OF   CASES. 


Beferences  are  to  sectionB. 


Simpson  v.  Feltz  (1  McC.  Ch.  213), 

57. 
Sims  V.  Smith  (11  Rich.  565).  234. 
Sindelare  v.  Walker  (137  III.   43), 

97,  98,  224,  226. 
Skillman  v.  Lachman  (23  Cal.  198), 

29. 
Skinner  v.  Dayton  (19  Johns.  513), 

180,  240. 
Slemmer's  Appeal  (58  Pa.  169),  240. 
Smith  V.  Ayer  (101  U.  S.   320),  269. 
Smith  V.  Ayrault  (71   Mich.   475), 

126. 
Smith  V.  Black  (9  S.  &  R.  142),  199. 
Smith  V.  Cisson  (1  Colo.  29),  181. 
Smith  V.  Collins  (115  Mass.  388),  196. 
Smith  V.  Cooper  (5  Abb.  274),  86. 
Smith  V.  Edwards  (7  Humph.  106), 

283. 
Smith  V.  Everett  (27  Beav.  446),  89. 
Smith  V.  Everett  (126  Mass.  304),  251. 
Smith  V.  Jeyes  (4  Beav.  505),  76. 
Smith  V.  Kemp  (92  Mich.  357),  139. 
Smith  V.  Sheldon  (35  Mich.  42),  275. 
Smith  V.  Sloan  (37  Wis.  285),  162. 

174. 
Smith  V.  Smith  (87  Iowa,  93),  289. 
Smith  V.  Walker  (57  Mich.  456).  87. 
Snell  V.  Dwight  (120  Mass.  9),  20. 
Snider's  Sons  Co.  v.  Troy  (91  Ala. 

224),  11. 
Sniveley  v.  Matheson  (12  Wash,  88), 

174. 
Snyder  Mfg.  Co.  v.  Snyder  ( —  Ohio 

St.  — ),  86,  87,  88,  89. 
Sodiker  v.  Applegate  (24  W.  Va. 

411),  50,  68. 
Solomon  v.   Kirkwood    (55   Mich. 

256),  240. 
Somerljy  v.  Buntin  (118  Mass.  279), 

81,  151. 
Soper  v.  Fry  (37  Mich.  236),  179. 
Southern  Fertilizer  Co.  v.  Reams 

(105  N.  C.  283),  62. 
Sparman  v.  Keim  (83  N.  Y.  245),  23. 

XX 


Sparrow  v.  Kohn  (109  Pa.  St  359), 

83. 
Spaulding  v.   Stubbings  (86  Wis. 

255),  48,  50. 
Sprout  V.   Crowley  (30  Wis.   187), 

138. 
Staats  V.  Bristow  (73  N.  Y.  264),  97. 
Stables  v.  Eley  (1  C.  &  P.  614),  266. 
Stanhope  v.  Swafford  (80  Iowa,  45), 

204. 
Stanton  v.  Westover  (101  N.  Y.  265), 

298. 
Staples  V.  Sprague  (75  Me.  458),  189. 
State  V.  Merritt  (70  Mo.  275),  224. 
Stein  V.  La  Dow  (13  Minn.  412),  172. 
Stevens  v.  Faucet  (24  111.  483),  52. 
Stevens  v.  Perry  (113   Mass.  380), 

300. 
Stevenson  v.  Erskine  (99  Mass.  367), 

76. 
Stewart  v.   Brown   (37  N.  Y.  350), 

217. 
Stewart  v.  Robinson  (115  N.  Y.  328), 

245,  269. 
Stillraan  v.  Harvey  (47  Conn.  27), 

176,  181. 
Stirling  v.   Heintzman   (42  Mich, 

449),  28. 
Stoddard  Mfg.   Co.  v.  Krause  (27 

Neb.  83),  262. 
Stone  V.  Clark  (1  Mete.  378),  76. 
Stone  v.  Wendover  (2  Mo.  Ap.  247), 

143,  158. 
Stout  V.  Baker  (32  Kan.  113).  215. 
Strang  v.  Bradner  (114  U.  S.  555), 

204. 
Strong  V.  Lord  (107  III.  25),  109. 
Strong  V.  Smith  (62  Conn.  39),  169. 
Suan  V.  CaiTe  (122  N.  Y.  308),  25. 
Sulhvan  v.  Smith  (15  Neb.  476),  172, 
Suydam  v.  Barber  (18  N.  Y.  468). 

199. 
Swan  V,  Steele  (7  East,  210).  202, 
Sweeney  v.  Neoly  (53  .Midi.  121),  170. 
Sweet  V.  Wood  (18  R.  1.  386),  181,  192. 
xiii 


TABLE    OF   CASES. 


Eeferenoes  are  to  sections. 


Swift  V.  Ward  (80  Iowa,  700),  238, 

243. 
Swigert  v.  Aspden  (52  Minn,  5G5), 

263. 
Sykes  v.  Beadon  (11  Ch.  Div.  170), 

20. 
Symonds  v.  Jones  (82  Me.  302),  86. 

T. 

Taft  V.  Church  (162  Mass.  527),  203. 
Tapley    v.    Butterfield     (1    Mete, 

Mass.,  515),  183. 
Tarbell  v.  West  (86  N.  Y.  287),  110. 
Tate  V.  Clements  (16  Fla.  339),  272. 
Teague   v.  Lindsey  ( —  Ala.  — ), 

289. 
TebbettS  v.  Dearborn  (74  Me.  392), 

112. 
Thayer    v.    Augustine    (55    Mich. 

187),  50. 
Thayer  v.  Humphrey  (91  Wis.  276), 

298,  299. 
Theus  V.  Dugger  (93  Tenn.  41).  25. 
Thompson  v.  First  Nat.  Bank  (111 

U.  S.  529),  70. 
Thornton   v.   Lambeth  (103  N,  C. 

86),  195. 
Thrall  t.  Seward  (37  Vt.  573),  78. 
Thropp  V.  Richardson  (132  Pa.  St. 

399),  141. 
Thurlow   V.  Warren   (82  Me.   164), 

217. 
Tillinghast  v.  Champlain  (4  R.  I. 

173),  111. 
Tischler  v.  Kurtz  (35  Fla.  323),  180. 
Tobey  v.  Bristol  County  (3  Story, 

819),  81. 
Todd  V.  Emly  (7  M.  &  W.  427,  8  id. 

505),  7. 
Todd  V.  Jackson  (75  Ind.  272),  206. 
Todd  V.  Rafferty  (30  N.  J.  254),  113. 
Tom  V.  Goodrich  (2  Johns.  214),  198. 
Townshend  v.  Goodfellow  (40  Minn. 

312),  84. 


Traphagen  v.  Burt  (67  N.  Y.  30),  95- 
Trego  V,  Hunt  (96  Ap.  Cas.  7),  87, 

89,  112. 
Trentman  v.  Swartzell  (85  Ind.  443), 

289. 
Troughton  v.  Hunter  (18  Bear.  470), 

264. 
Tucker  v.  Cole  (54  Wis.  539),  184. 
Turner  v.  Jaycox   (40    N.  Y.  470), 

290. 
Turner  v.  Major  (3  Giff.  442),  149. 
Tyler  v.  Waddingham   (58   Conn. 

375),  105. 

u. 

Uhler  V.  Browning  (28  N.  J.  L.  79), 

83. 
Ullman  v.  Myrick  (93  Ala.  532),  185. 
United  States  v.  Astley  (3  Wash. 

512),  198. 
United  States  Bank  v.  Binney  (»■ 

Mason,  189),  15,  79,  201. 

Y. 

Vail  V.  Winterstein  (94  Mich.  230), 

25. 
Valentine  v.  Wysor  (123  Ind.  47), 

268,  309. 
Vance  v.  Blair  (18  Ohio,  532),  143, 

158. 
Vanderhurst  v.  De  Witt  (95  Cal.  57), 

36. 
Van  Horn  v.  Corcoran  (127  Pa.  St. 

255),  313. 
Van  Keuren  v.  Parmelee  (2  N.  Y. 

523),  272. 
Van  Keuren  v.  Trenton  Mfg.   Co. 

(13  N.  J.  Eq.  302),  152. 
VanKleeck  v.  McCabe  (87  Mich. 

599),  70,  245,  299. 
Vanness  v.   Dubois  (64  Ind.  338), 

274. 
Vannerson  v.  Cheatham   (44  S.  C. 

— ),  25. 


TABLE    OF    CASES 


References  are  to  sections. 


Tenion  v.  Hallam  (34  Ch.  Div.  T-IS), 

89. 
Vincent  v.  Martin  (79  Ala.  540),  245. 
Vinson  v.  Beveridge  (3  MacAr.  597), 

68. 
Vonderbank    v.   Schmidt  (44   La. 

Ann.  264),  86,  89. 
Voorhees  v.  Jones  (29  N.  J.  Eq.  275), 

52. 

w. 

^Vadley  v.  Jones  (55  Ga.  329),  153. 
Waggoner  v.  First  Nat.  Bank  (43 

Neb.  84),  50,  68. 
Wahl  T.  Barnum  (116  N.  Y.  87),  32. 
Walker  v.  Bean  (34  Minn.  427),  171. 
Walker    v.   Wait  ,(50  Vt.   668),   4, 

130. 
Walker  v.  Walker  (66  Vt.  285),  174. 
Walker  v.  Whipple  (58  Mich.  476), 

237. 
Waller  v.  Keyes  (6  Vt.  257),  165. 
Walling  V.  Burgess  (122  Ind.  299), 

111. 
Walsh  V.  Lennon   (98   111.  27),  174, 

175. 
W^ann  v.  McNulty  (7  111.  355),  199. 
Ward  V.  Barter  (1  E.  D.  Smith,  423), 

187. 
AVard  v.  Brigham  (127  Mass.  24),  11. 
Wai'der  v.  Newdigate  (11  B.  Mon., 

Ky.,  174).  177. 
W^arren  v.  Farmer   (100  Ind.  593), 

289,  295. 
Warriner  v.  Mitchell  (128  Pa.  St. 

15.3),  200. 
Watson  V.  Fl.'tclier  (7  Gratt.  1),  18. 
Watson  V.  Ilinchinan  (42  Mich.  27), 

205. 
Watson  V.  Murray  (23  N.  J.  Eq.  257), 

18. 
Watts  V.  Rice  (75  Ala.  289),  226. 
Waugh  V.  Carver  (2  H.  Bl.  235),  56. 
Waverly  Nat.  Bank  v.  Hall  (150  Pa. 

St.  466),  50. 


Way  V.  Stebbins  (47  Mich.  296),  106. 
AVebb  V.  Fordyce  (55  Iowa,  11),  116. 
Webb  V.  Johnson  (95  Mich.  325),  30. 
AVebster  v.  Clark  (34  Fla.  637),  50, 

71. 
Weeks  v.  McClintock  (50  Ark.  193), 

120. 
AVells  V.  Ellis  (68  Cal.  243),  236,  247. 
AVessels  v.  AVeiss  (166  Pa.  St.  490), 

62. 
AVest,  In  re  (39  Fed.  Rep.  203),  295. 
Western   Stage   Co.   v.  Walker  (2 

Iowa,  504),  271. 
Wheatley  v.  Tutt  (4  Kan.  240),  173. 
Wlieeler  v.  Arnold  (30  Mich.  304). 

125,  132. 
AVliigliam's  Appeal  (63  Pa.  St.  194), 

98,  100. 
Whitconib  v.  Converse  (119  Mass. 

38),  92,  121,  307,  308. 
AVhite   V.  Campbell   (18   R.  I.  150), 

226. 
White  V.  Eiseman   (134  N.  Y.  101), 

313. 
White  V.  Smith  (12  Rich.  595),  212. 
AVhite  V.  Tudor  (24  Tex.  639),  272. 
Whitman  v.  Keith  (18  Ohio  St.  134), 

85. 
AVhittaker  v.  Howe   (3  Beav.  383), 

149. 
Whittenton    Mills    v.    Upton    (10 

Gray,  582),  26. 
AVliitwell  V.  Arthur  (35  Beav.  140), 

254. 
AVhitworth   v.   Patterson   (6    Lea, 

119),  299. 
AVilcox  V.  Jackson  (7  Colo.  521).  186. 
Wild  V.  ]\Iihu'  (20  Beav.  504),  97. 
Wilkenson  v.  Tilden  (9  Fed.  Rep. 

683),  152. 
AVilkins  v.  Pearce  (5  Denio,  541), 

188. 
AVillet  V.  Brown  (65  Mo.  138),  109. 
Williams  v.  Farraiid  (88  Mich.  473), 

85,  86,  88,  89. 

XV 


TABLE    OF    C^SES. 


Keferences  are  to  sections. 


Williams  v.  Frost  (27  Minn.  25.j), 

173. 
Williams  v.  Lewis  (115  Ind.  45),  100, 

169. 
Williams  v.   Whedon  (109   N.   Y. 

333),  268. 
Wilmot  V.  The  Ouachita  Belle  (32 

La.  Ann.  607),  179. 
Wilson   V.  Fitchter  (11   N.  J.  Eq. 

71),  152. 
Wilson  V.  Richards  (28  Minn.  337), 

161. 
Wilson  V.  Robertson  (21  N.  Y.  587), 

288. 
Wilson  V.  Waugh  (101  Pa.  St.  233), 

243. 
Winchester  v.   Glazier  (152  Mass. 

816),  76,  120,  121. 
Winship  v.  U.  S.  Bank  (5  Peters, 

529),  162,  193. 
Winslow  V.  Wallace  (116  Ind.  324), 

124,  289. 
Winter  v.  Stock  (29  Cal.  407),  84. 
Wintermute  v.  Tarrant  (83  Mich. 

555),  130. 
Wipperman  v.  Stacy  (80  Wis.  345), 

49,  163. 
Wood  V.  O'Kelly  (8  Gush.  406),  223. 
Wood  V.  Railroad  Go.  (73  N.  Y.  196), 

83. 


Woodmansee  v.  Holcomb  (34  Kan.- 

35),  287,  288,  289. 
Woodruf  V.  Scaife  (83  Ala.  152),  163, 
Woodward  v.  Lazar  (31  Cal.  448),  88. 
Woodward  v.  McAdam   (101   Gal. 

438),  84. 
Woodward-Holmes  Go.  v.  Nudd  (5^ 

Minn.  236),  109. 
Woodworth  v.   Bennett  (43  N.  Y. 

273),  20. 
Word  V.  Word  (90  Ala.  81),  155. 


Yates  V.  Lyon  (61  N.  Y.  344),  23. 
Yetzer  v.  Applegate  (83  Iowa,  736),. 

114. 
York  V.  Orton  (65  Wis.  6),  276. 
York  Gounty  Bank's  Appeal  (33  Pa. 

St.  446).  289. 
Yorks  V.  Tozer  (59  VAnn.  78),  116. 
Yorkshire  Bank  Co.  v.  Beatson  (5 

Ch.  Div.  109),  201. 


Zabriskie  v.  Railroad  Co.  (18  N.  J» 

Eq.  178),  189. 
Zell's  Appeal  (126  Pa.  St.  742),  119. 
Zimmerman  v.  Erhard  (83  N.  Y, 

74),  83. 


INTRODUCTION. 


Relation  to  other  subjects. —  The  law  of  Partnership,  of 
Avhich  we  are  now  to  begin  the  study,  is  one  of  the  most  in- 
teresting and  important  branches  of  commercial  law.  It 
appropriately  follows  the  law  of  Agency,  of  which  it  is  often 
said  to  be  a  part.  It  belongs  to  that  class  of  personal  rela- 
tions, heretofore  spoken  of,  which  are  created,  not  by  law, 
but  by  the  contract  of  the  parties. 

Historical. —  It  is  of  ancient  origin.  It  was  known  to  the 
Homans  and  highly  developed.  It  was  adopted  and  regu- 
lated by  statutes  in  the  commercial  cities  of  Europe,  and 
was  from  thence  engrafted  upon  the  English  common  law. 
Since  its  incorporation  into  the  latter  system  it  has  lost  many 
of  its  former  characteristics  and  has  acquired  others  which 
were  entirely  unknown  to  it  in  its  origin. 

Biblioj^rapliical. —  It  has  been  treated  by  many  writers  — 
among  English  writers  by  Archbold,  CoUyer,  Dixon,  Fox,^ 
Lindley  and  Pollock;  and  among  American  writers  by 
Bates,  Parsons  (Theophilus),  Parsons  (James)  and  Story. 
The  leading  text-books  now  in  use  in  this  country  are  Bates 
on  Partnership,  a  recent  and  very  excellent  American  work 
in  two  volumes;  Ewell's  Lindley,  an  American  edition  of 
the  leading  English  work,  in  two  volumes,  and  highly  valu- 
able; "Wentworth's  Lindley,  an  excellent  edition  in  one  vol- 
ume ;  and  Parsons  (T.)  on  Partnershi|),  a  concise  but  excellent 
one  volume  work,  of  which  a  new  edition  has  recently  been 


INTRODUCTION. 


issued;  and  Story  on  Partnership.  The  subject  of  Limited 
Partnership  has  also  been  treated  by  Mr.  Bates,  in  a  sep- 
arate volume. 

Codification. —  In  England  and  several  of  the  states  the 
law  of  partnership  has  been,  to  a  greater  or  less  extent,  re- 
duced to  the  form  of  a  statute.  These  statutes  or  codes  are 
of  course  authoritative  in  their  respective  jurisdictions,  but 
they  furnish  elsewhere  an  excellent  subject  of  study  in  com- 
parison with  common-law  rules.  The  most  important  of 
these  statutes  are  given  in  Appendix  A. 


THE  LAW  OF  PARTNERSHIP. 


CHAPTER  L 


DEFINITIONS  AND  DISTINCTIONS. 


§  1 

2 


Partnership  defined. 
The  essential  elements. 
8.  Partnership  a  contract  rela- 
tion. 

4.  Is  it  a  distinct  entity? 

5.  The  commercial  conception  of 

partnership. 

6.  How    a    partnership     differs 

from  a  corporation. 

7.  Intermediate  associations. 


5  8.  Joint  tenancy  and  co-owner- 
ship. 
9.  Joint  purchasers  of  goods  for 

resale. 
10,  11.  Defectively  organized  cor- 

IJorations. 
13.  Promoters  of  companies. 
13, 14.  Contemplated  partnerships. 

15.  Classification  of  partnerships. 

16.  Classification  of  partners. 


§1.  Partnership  defined. —  Partnership  is  a  legal  rela- 
tion, based  upon  the  express  or  implied  contract  of  two  or 
more  competent  persons  to  unite  their  property,  labor  or 
skill  in  carrying  on  some  lawful  business  as  principals  for 
their  joint  profit.  The  persons  so  united  are  called  ijartners. 
The  term  copartnersJvq)  is  sometimes  used  to  designate  the 
relation,  and  the  term  copartners  to  designate  the  parties. 
The  partners  collectively  are  often  called  thajiryn. 

Any  attempt  to  frame  a  satisfactory  definition  of  part- 
nership is  probably  a  somewhat  hazardous  undertaking. 
This  is  partly  owing  to  the  difficulty  inhering  in  any  attempt 
at  definition,  but  it  is  chiefiy  attributable  to  the  fact  that 
the  legal  conception  of  partnership  has  not  always  been  clear 
and  definite,  and  that  the  legal  test  for  determining  the 
existence  of  the  relation  has  varied  from  time  to  time.  Mr. 
Justice  Lindley,  in  his  admirable  treatise  upon  the  subject,' 

1  Lindley  on  Partnership  (Ewells  ed.),  vol.  I,  ix  1. 


2.] 


LAW    OF    PARTNERSHIP. 


declines  to  attempt  a  definition,  saying  that  to  frame  one 
"which  shall  be  both  positively  and  negatively  accurate  is 
possible  only  to  those  who,  having  legislative  authorit}'^,  can 
adapt  the  law  to  their  own  definition."  He  collects,  how- 
ever, no  fewer  than  nineteen  definitions  which  have  been 
given  by  other  writers;  and  some  of  the  most  important  of 
these  are  reproduced  in  the  foot-note.^ 

§2.  Same  subject  —  The  essential  elements.  —  These 
several  definitions  vary  in  minor  particulars,  but  from  them 
all  at  least  the  characteristic  elements  of  partnership  may  be 
g-athered.     Thus  — 

1.  It  is  an  unincorporated  association  or  legal  relation. 

2.  It  is  created  not  by  law  but  by  the  agreement  of  the 
parties. 


1 "  A  partnership  is  the  contract 
relation  subsisting  between  per- 
sons who  have  combined  their  prop- 
erty, labor  or  skill  in  an  enterprise 
or  business  as  principals  for  the 
purpose  of  joint  profit."  —  Bates. 

"Partnership,  as  between  the 
parties  themselves,  is  a  voluntary- 
contract  between  two  or  more  per- 
sons for  joining  together  their 
money,  goods,  labor  and  skill,  or 
any  or  all  of  them,  under  an  under- 
standing that  there  shall-  be  a  com- 
munion of  profit  between  them, 
and  for  the  purpose  of  carrying  on 
a  legal  trade,  business  or  advent- 
ure.*'—  CoUyer. 

"Partnership,  often  called  copart- 
nership, is  usually  defined  to  be  a 
voluntary  contract  between  two  or 
more  competent  persons  to  place 
their  money,  effects,  labor  and  skill, 
or  some  or  all  of  them,  in  lawful 
commerce  or  business,  with  the 
understanding  that  there  shall  be 
a  communion  of  the  profits  thereof 
between  them."  —  Story. 


"  We  define  partnership  as  the 
combination  by  two  or  more  per- 
sons of  capital,  or  labor,  or  skill, 
for  the  jjurpose  of  business  for  their 
common  benefit."  —  Parsons. 

The  latest  editor  of  Mr.  Parsons' 
book,  Mr.  Beale,  substitutes  the  fol- 
lowing: "Partnership  is  a  legal 
entity  formed  by  the  association 
of  two  or  more  persons  for  the  pur- 
por.3  of  carrying  on  business  to- 
gether and  dividing  jts  profits  be- 
tween them." 

The  new  English  "  Partnership 
Act"  defines  the  relation  thus: 
"  Partnership  is  the  relation  which 
subsists  between  persons  carrying 
on  a  business  in  common  with  a 
view  of  profit."        : 

See,  also,  the  remarks  of  Sir 
George  Jessel,  M.  R.,  in  Pooley  v. 
Driver  (1876),  Law  Reports,  5  Cli. 
Div.  458,  Ames'  Cases  on  Partner- 
ship, 87;  and  the  case  of  Queen  v. 
Robson  (1885),  16  Q.  B.  Div.  137, 
Paige's  Cases  on  Partnership,  11. 


DEFIXITIOXS    AXD    DISTIXCTIOXS.  [§  3. 

3.  It  requires  t^vo  or  more  competent  parties.    • 

4.  It  involves  the  establishment  of  a  common  stock,  fund 
or  capital  of  some  sort  by  the  union  of  the  several  contribu- 
tions of  the  parties. 

5.  It  contemplates  the  transaction  of  some  lawful  busi- 
ness, trade  or  occupation,  which  the  parties  are  to  own  and 
carry  on  as  principals. 

6.  The  purpose  of  the  union  is  the  pecuniary  gain  of  the 
members.^ 

In  several  of  the  definitions,  partnership  is  spoken  of  as  a 
contract.  It  is,  however,  rather  the  result  of  the  contract 
than  the  contract  itself;  it  is  the  relation  or  association 
Avhich  the  contract  creates. 

§  3.  Is  a  contract  relation.—  Partnership  is  a  contract 
relation  and  not  a  status.-  In  this  respect  it  resembles 
agency.  It  is  created,  limited,  regulated  and  terminated,  as 
between  the  parties  themselves,  by  their  contract.  The  law^ 
does  not  create  partnership,  or  arbitrarily  presume  its  ex- 
istence.^ As  has  been  seen  in  the  study  of  agency,^  author- 
ity in  one  person  to  bind  another  as  his  agent  is  sometimes 
said  to  be  treated  by  law^ ;  but  this  is  not  true  in  the  law  of 
partnership.  One  indi\'idual  may,  it  is  true,  be  held  liable 
to  particular  persons  as  a  partner,  by  estoppel,  but  this  lia- 
bility, as  will  be  seen  hereafter,^  is  limited  to  those  only  in 

1  An  association  organized,  not  nership.  Agency,  he  asserts,  is  not 
for  gain,  but  for  the  accomplish-  a  status  but  a  contractual  relation, 
ment  of  some  social  or  religious  while  iiartnership  is  the  reverse, 
purpose,  as,  for  example,  a  Young  It  is  believed,  however,  that  the 
Men's  Christian  Association,  is  not  two  relations  are  alike  contractual 
a  partnership.  Queen  v.  Robson  »  Phillips  v.  Phillips  (18G3>,  49  111. 
(1885),  16  Q.  B.  Div.  137;  Paige's  437,  Paige's  Cas.  15;  Re  Gibbs'  Es- 
Partnership  Cases,  11.  See,  also,  tate  (1893),  157  Pa.  59,  27  Atl.  Rep. 
§7,po.s^.  383,    22    L.    R.   A.   276.     Compare 

2  Bates  on  Partnership,  vol.  I,  §  2.  Phillips  v.  Phillips,  stipra,  with 
Mr.  James  Parsons,  in  his  work  on  Ratzer  v.  Ratzer  (1877),  28  N.  J.  Fa\. 
the  Principles  of  Partnership  (Bos-  136. 

ton,  1889),  §  101,  does  indeed  de-        *  Mechem  on  Agency,  §§  1,  83. 
Glare  the  contrary,  distinguishing        *  Post,  §  7^. 
in   this  respect  agency  and  part- 

3 


§§  4,  5.]  LAW    OF    PARTNEKSHIP. 

whose  favor  the  estoppel  operates,  and  does  not  make  such 
individual  an  actual  partner,  nor  amount  to  the  general 
creation  of  a  partnership  between  him  and  those  with  whom 
he  was  reputed  to  be  associated.  As  a  general  rule  there 
can  be  no  partnership  where  the  parties  have  not  by  their 
agreement  created  one. 

§  4.  Is  a  partnership  a  distinct  entity?  —  A  partnership 
is  sometimes  said  to  be  a  legal  entity  separate  and  distinct 
from  the  persons  composing  it,  but  from  a  legal  standpoint 
this  can  be  true  only  in  a  limited  sense.  For  most  purposes 
the  law  regards  only  the  individuals  who  occupy  the  rela- 
tion ;  though  by  statute  in  many  states  the  partnership  itself 
is  regarded  by  the  law  as  a  distinct  entity  for  a  few  special 
purposes,  as  in  the  case  of  taxing  acts,  acts  providing  for  the 
filing  of  chattel  mortgages,  and,  occasionally,  acts  permit- 
ting process  to  run  against  the  partnership  as  suoh.^  In 
most  other  cases,  when  the  partnership  is  spoken  of  as  a 
separate,  legal  entity,  having  its  own  property,  creditors 
and  the  like,  little  more  is  meant  as  a  legal  proposition  than 
that  the  partners  as  such  have  special  rights  and  liabilities 
which  are  worked  out  through  their  partnership  relation. ^ 

§  5.  Same  subject  —  The  commercial  conception  of  part- 
nership.—  The  commercial  conception  of  a  partnership  is 

1  See  Faulkner  v.  Hyman  (1886),  well  grasiDed  by  the  old  Roman 
142  Mass.  53;  Robertson  v.  Corsett  lawyers,  and  which  was  partly 
(1878),  39  Mich.  777:  Fitzgerald  v.  understood  in  the  courts  of  equity.' 
Grimmell  (1884),  64  Iowa,  261;  And  in  a  very  recent  case  the 
Walker  v.  Wait  (1878),  50  Vt.  668.  court  of  appeals  of  New  York,  than 

2  In  Meehan  v.  Valentine  (1891),  which  no  court  has  more  stead- 
145  U.  S.  611,  the  court,  referring  fastly  adhered  to  the  old  form  of 
to  the  case  of  Pooley  v.  Driver,  stating  the  rule,  has  held  that  a 
L.  R.  5  Ch.  Div.  458,  says:  "In  the  partnership,  though  not  strictly  a 
case  last  above  cited  Sir  George  legal  entity  as  distinct  from  the 
Jessel  said:  '  You  cannot  grasp  the  persons  composing  it,  yet  being 
notion  of  agency,  properly  speak-  commonly  so  regarded  by  men  of 
ing,  unless  you  grasp  the  notion  of  business,  might  be  so  treated  in  in- 
the  existence  of  the  firm  as  a  sepa-  terpreting  a  commercial  contract, 
rate  entity  from  the  existence  of  Bank  of  Buffalo  v.  Thompson,  121 
the  partners;  a  notion  which  was  N.  Y.  280." 


DEFINITIONS   AND    DISTINCTIONS.  [§  5. 

undoubtedly  different.  "  Commercial  men  and  accountants," 
says  Mr.  Justice  Lindley,  "  are  apt  to  look  upon  a  firm  in 
the  light  in  which  lawyers  look  upon  a  corporation,  i.  e.,  as 
a  body  distinct  from  the  members  composing  it,  and  having 
rights  and  obligations  distinct  from  those  of  its  members. 
Hence,  in  keeping  partnership  accounts,  the  Jinn  is  made 
debtor  to  each  partner  for  what  he  brings  into  the  common 
stock,  and  each  partner  is  made  debtor  to  the  firm  for  all 
that  he  takes  out  of  that  stock.  In  the  mercantile  view, 
partners  are  never  indebted  to  each  other  in  respect  of  part- 
nership transactions,  but  are  always  either  debtors  to  or 
creditors  of  the  firm.  .  .  .  The  partners  are  the  agents 
and  sureties  of  the  firm:  its  agents  for  the  transaction  of  its 
business ;  its  sureties  for  the  liquidation  of  its  liabilities  so 
far  as  the  assets  of  the  firm  are  insufiicient  to  meet  them. 
The  liabilities  of  the  firm  are  regarded  as  the  liabilities  of 
the  partners  only  in  case  they  cannot  be  met  by  the  firm 
and  discharged  out  of  its  assets.  But  this  is  not  the  legal 
notion  of  a  firm.  The  firm  is  not  recognized  by  lawyers  as 
distinct  from  the  members  com])osing  it."  ^ 

Though  the  legal  and  the  mercantile  views  are  thus  dis- 
tinct, there  is  in  many  quarters  a  growing  tendency  to  in- 
corporate the  mercantile  conception  in  the  legal  theory  as 
largely  as  the  inherent  nature  of  the  partnership  Avill  per- 
mit ;  and  though  the  practical  consequences  of  the  changed 
conception  are  usually  not  pronounced,  it  often  aids  in  a 
clearer  conception  of  the  relative  rights  and  powers  of  the 
firm  collectively  and  the  partners  as  iudividuals.'- 

•  Li ndlej' on  Partnership  (E wells  ceiving  order  is  wade  against  the 

2d  Am.  ed.),  vol.  I,  p.  110.  firm,  and  the  ease  has  heen  argued 

-But  there  is  great  practical  dif-  as  though  tlie  firm  had  a  separate 

ficulty  in  completely  adopting  the  existence    as    distinguished    from 

mercantile   theory.      Tims  in   Ex  the    individual    memhers    of    tiie 

parte  Beaucliamp  (1804),  1  Q.  B.  1,  firm;  in  other  words,  as  if  it  were 

where  a  receiving  order  in  bank-  a  corporation  liaving  a  separate  ex- 

ruptcy  had  been  made  against  a  istence  from  tlie  imlividuals  wliidi 

firm  composed  of  an  adult  and  an  compose  it.     It  is  no  such  thing, 

infant,  Kay,  L.  J.,  .said:  "Tiie  re-  and  the  rules  [[termitting  prococd- 

5 


§  6.]  LAW   OF   PARTNERSHIP. 

§  6.  How  a  partnership  differs  from  a  corporation. — 

A  partnership  differs  in  material  respects  from  a  corporation. 

A  partnership  is  a  voluntary,  unincorporated  association 
of  individuals  whose  legal  relation  is  based  upon  their  agree- 
ment, and  needs  no  special  statutory  authority  to  give  it 
force  and  effect.  They  continue  to  act  in  this  relation  as 
individuals.  They  sue  and  are  sued  only  in  their  individual 
names.  The  death  of  one  operates  usually  to  terminate  the 
relation.  The  transfer  of  the  interest  of  one  has  usually  the 
same  effect,  and  operates,  not  to  introduce  the  transferee 
into  the  relation,  as  a  party  to  it,  but  merely  to  give  him 
such  share  as  his  transferrer  would  have  upon  a  dissolution. 
Each  partner  is,  in  general,  personally  responsible  for  all  the 
debts  of  the  partnership,  notwithstanding  that  he  has  fully 
paid  in  to  it  his  agreed  contribution. 

A  corporation,  on  the  other  hand,  is  a  distinct  legal  entity, 
created  by  some  express  legislative  authority,  either  special 
to  the  particular  case  or  general  in  like  cases.  It  acts  in  its 
corporate  capacity  only,  without  regard  to  the  individuals 
who  compose  it.  It  may  sue  and  be  sued  in  its  own  name. 
The  death  of  one  or  more  corporators  does  not  dissolve  it. 
One  corporator  may  transfer  his  share  without  affecting  the 
corporate  existence,  and  his  transferee  may  take  his  place 
in  the  corporation,  which  proceeds  without  regard  to  changes 
in  i\iQ  2)ersonnel  of  the  corporators.  One  corporator,  having 
paid  his  subscription,  is  not  usually  subject  to  any  further 
personal  responsibility  for  the  debts  of  the  concern.  In  these 
characteristics  of  limited  liability,  facility  of  transfer,  and 

ings  in  the  firm  name]  do  not  mean  57  Ga.  239;  Chambers  v.  Sloan,  19 
anything  of  the  kind.  Under  the  Ga.  84.)  So  in  a  late  case  in  New 
rules,  facilities  have  been  given  for  York  —  Jones  v.  Blun  (1895),  145 
proceeding  against  a  firm  in  the  N.  Y.  333 — the  com-t,  notwithstand- 
firni  name,  for  this  simple  reason —  ing  what  was  said  in  Bank  of  Buf- 
that  it  is  not  always  easy  to  find  falo  v.  Thompson,  supra,  points  out 
out  who  who  are  the  imrtners  in  a  that  it  is  only  for  certain  purposes 
firm."  (See,  also,  Drucker  v.  Well-  that  the  partnership  may  be  re- 
house (1888),  82  Ga.  129,  8  S.  E.  Rep.  garded  as  an  entity. 
40, 2  L.  R.  A.  328;  Harris  v.  Visscher, 


DEFINITIONS   AND   DISTINCTIONS,  [§§  7,  8. 

immunity  from  dissolntion  by  death,  are  found  the  leading 
inducements  to  the  formation  of  corporations. 

§  7.  Intermediate  associations. —  In  many  of  the  states, 
statutes  have  pro^^ded  for  the  organization  of  associations 
partaking  more  or  less  of  the  characteristics  of  both  partner- 
shi])s  and  corporations.  Thus,  there  arejoint-siock  cojnjxinies, 
which  usually  are  simply  partnerships  with  transferable 
shares;  paHncrslup  associations^  limited^  which  are  usually 
but  a  crude  form  of  corporation;  and  limited jxirtnershijjs, 
which  are  partnerships  having  one  or  more  general  mem beijs 
subject  to  the  usual  liabilities  of  partners,  and  also  one  or 
more  specialpartners  w^hose  liability  is  limited  to  the  amount 
contributed.  The  legal  peculiarities  of  these  several  types 
wall  be  more  fully  considered  in  later  chapters. 

In  addition  to  these  are  other  bodies,  not  statutory,  and 
not  organized  for  the  purpose  of  pecuniary  profit,  which  are 
sometimes  sought  to  be  held  liable  as  partnerships,  but  which 
are  not  such  in  fact.  Of  these  the  unincorporated  social 
clubs,  committees,  lodges,  fraternal  societies,  christian  asso- 
ciations, granges  and  co-operative  associations,  are  common 
examples.  Such  bodies  are  not  partnerships,  nor  is  the  lia- 
bility of  a  member  to  be  determined  by  the  law  of  partner- 
ship, but  by  that  of  principal  and  agent  —  those,  and  those 
only,  being  liable  as  principals  who  have  expressly  or  im- 
pliedly authorized  acts  to  be  done  in  their  behalf,  or  who 
have  subsequently  ratified  them.^ 

§  8.  Joint-tenancy  and  co-ownersliip. — loint-tenants 
and  co-owners  are  not  thereby  partners.-    They  differ  in 

iFlemyng    v.    Hector    (1836),    2  Ag.  45;  Davison  v.  Ilolden  (1887), 

Mees.  &  Wels.  172;  Todd  v.  Einly  55   Conn.  103,  3   Am.  St.   Rop.  40, 

(1841),  7  id.  427;  S.  C.,8  id.  505;  La-  Mechem's  Cas.  on  Ag.  47;  Hurt  v. 

fond  v;  Deems  (1H80),  81  N.  Y.  507;  Latlirop  (1883),  52  Midi.  lOli. 

Eichbaum  v.  Irons  (1843),  6  Watts  -See  1  Lindley  on    Partn.  (Ew- 

&  Serg.  (Pa.)  68,  40  Am.  Dec.  540;  ell's  2d  Am.  ed.),  p.  52;  Dunliam  v. 

Ash  V.  Guie  (1881),  07  Pa.  St.  493,  Loverock  (1803),  158  Pa.  St.  107,  27 

39  Am.  Rep.  818,  Mocliem's  Cas.  on  Atl.  R-p.  990,  38  Am.  St.  Rep.  H:is. 


/• 


I  S.]  LAW    OF   PARTNERSHIP. 

many  particulars,  of  which  the  following  are  the  most  im- 
portant : 

1.  Co-ownership  is  not  necessarily  the  result  of  an  agree- 
ment to  create  it/  Avhile  partnership  is.-^ 

2.  Co-ownership  does  not  necessarily  involve  community 
of  profit  or  loss,^  while  partnership  cloes.^ 

3.  One  co-owner  may,  without  the  consent  of  the  others, 
assign  his  interest  in  such  a  way  that  his  assignee  will  as- 
sume his  relations  to  the  other  co-owners,'  but  one  partner 
cannot  do  this.''  / 

4.  One  co-owner  is  not  as  such  the  agent  of  the  others,^ 
while  a  partner  is.^ 

5.  One  co-owner  has  no  lien  on  the  common  property  for 
expenses  or  outlays,  or  for  what  may  be  due  from  the  oth- 
ers as  their  share  of  a  common  debt,^  while  a  partner  has 
such  a  lien.'" 

Other  distinctions  exist,  but  these  are  sufficient  to  illus- 
trate the  differences. 

But  while  the  legal  distinction  between  partnership  and 
co-ownership  as  such  is  thus  clearly  defined,  it  is  possible 
that  the  co-owners  may  so  deal  with  their  common  prop- 
erty as  to  assume  very  nearly,  if  not  entirely,  the  attitude  of 
partners.  Thus,  when  they  employ  it  in  business  with  a 
view  to  profit,  and  divide  such  profits  between  them,  part- 
nership may  result.^'  Even  the  division  of  the  gross  proceeds 
of  the  employment  of  their  common  ]3roperty  was  formerly 
deemed  sufficient  to  render  them  liable  as  partners,  though 
this  view  is  now  generally  abandoned,  as  will  be  seen  in  a 
later  section.'-     Until,  however,  it  appears  that  they  have 

1  Lindley  on  Partnership,  supra.        ^  Lindley,  supra;  Goell  v.  Morse 

2  See  ante,  %  3;  post,  §  43.  (1879),  126  Mass.  480. 

3  Lindley,  uhi  supra.  i"  See  post,  g  278-. 

^Seeposf,  j;^  46-48.  ii  See  post,  §  53;  Butler  Savings 

5  Lindley,  uhi  supra.  Bank  v.  Osborne  (1893),  159  Pa.  St. 

« See  2iost,  §  29.  10,   28  Atl.   Rep.  163,   39  Am.  St. 

■^  Lindley,  supra,  Eep.  665. 

8  See  post,  §  16 1.  i-  See  post,  %%  56,  57. 


DEFINITIONS    AND    DISTINCTIONS.  [§§  9,  10. 

changed  their  position  to  that  of  partners,  their  relation  as 
co-owners  "will  be  presumed  to  continue.^ 

§  9.  Joint  purchasers  of  goods  for  resale.- —  If  several 
persons  jointly  purchase  goods  for  resale,  with  a  view  to 
divide  the  profits  arising  from  the  transaction,  a  partnership 
may  thereby  be  created.*  But  persons  who  join  in  the  pur- 
chase of  goods,  not  for  the  purpose  of  selling  them  again 
and  dividing  the  profits,  but  for  the  purpose  of  dividing  the. 
goods  themselves,  are  not  partners,  and  are  not  liable  to  third 
persons  as  if  they  were.*  And  even  though  they  purchase 
for  the  purpose  of  resale,  their  agreement  may  show  that  no 
partnership  was  intended,  as  where  they  expressly  deny  to 
each  the  ordinary  attributes  of  partnership,  such  as  the  power 
of  either  to  sell  without  the  concurrence  of  the  other .^ 

§  10.  Defectively-organized  corporations. —  Whetherper- 
sons  are  to  be  held  lia^ble  as  partners  who  have  engaged  in 
business  in  pursuance  of  an  unsuccessful  attempt  to  organize 
a  corporation  is  a  question  upon  which  the  authorities  are 
in  conflict.  It  is  contended,  on  the  one  hand,  that  where 
the  association  has  done  business  and  entered  into  contracts 
as  a  corporation,  the  individuals  composing  it  cannot,  in  case 
it  appears  that  no  corporation  really  existed,  be  personally 
liable,  because  they  have  never  contracted  as  individuals  or 
intended  to  be  bound  as  such.  To  hold  them  liable  as  part- 
ners would  be  to  hold  them  upon  a  contract  which  they  never 

1  Dunham   v.    Loverock,   supra;  ^Qoell  v.  Morse  (1879),  12G  Mass. 

Butler  Savings  Bank  v.  Osborne,  480.  Here  two  men  bought  a  liorse 

snipra.  for  the  purpose  of  resale  at  a  profit, 

-  The  language    of   Mr.  Justice  but  it  was  agreed  that  either  one 

L'ntiley,  Ewell's  2(1  Am.  ed.,  p.  54,  who  should  have  possession  of  the 

is  here  substantially  adopted.  horse  should  feed  him  at  his  own 

•'Reid    V.    Hullinshead    (1825),   4  expense,  and,  though  each  was  to 

Barn.   &   Cr.   807,  Ames'   Cas.   on  endeavor    to     Hnd    a    purchaser, 

Partn.  29,  neither   was  to  sell   witliout   tlie 

•*  Coope  V.  Eyre  (1788),  1  H.  Blacks,  concurrence   of   the   other.     Tlicy 

37;  Hoare  V.  Dawes  (1780),  1  Doug,  were  held  to  be  tenants  in  com- 

371;    Gibson    v.   Lupton  (1832),   9  mon  and  not  partners. 
Bing.  297. 

9 


i^  11,]  '    LAW    OF   PARTNERSHIP. 

made  or  intended  to  make.  On  the  other  hand,  it  is  con- 
tended that  the  parties  must  have  intended  to  become  liable 
in  some  way,  and  inasmuch  as  they  have  failed  to  bind  them- 
selves as  a  corporation,  it  must  be  assumed  that  they  are 
liable  as  partners  —  that  it  is  only  through  the  fact  that  they 
are  corporators  and  not  partners  that  they  escape  personal 
liability;  and  hence  if  the  corporate  shield  fails,  the  individ- 
ual liability  necessarily  arises. 

§  11.  Same  subject  —  The  true  test.—  The  true  test,  it 
is  believed,  according  to  the  weight  of  modern  authority,  is 
to  be  found  in  the  nature  of  the  facts  which  have  operated 
to  prevent  complete  incorporation.  There  can  be  no  corpo- 
ration without  legislative  authority.  Hence,  if  there  be  no 
statute  at  all  which  authorizes  such  an  incorporation  as  that 
attempted,  or  if,  though  there  is  the  semblance  of  a  statute, 
it  is  really  void  as  being  repugnant  to  the  constitution,  and 
therefore  is  no  statute  in  legal  contemplation,  the  attempted 
incorporation  wholly  lacks  the  vital  element  which  would 
have  given  it  effect,  and  the  association  of  individuals,  which  ,  / 
could  not  possibly  be  a  corporation,  w^ill  be  deemed  in  law  a  ^"^ 
partnership.^  It  confessedly  is  not  a  covpordition  de  jure;' 
audit  cannot  even  be  deemed  a  corporation  de/acto,  because 
it  never  could  have  been  one  de  jure,  and  no  one  can  be  es- 
topped from  so  alleging. 

Where,  however,  there  was  ample  legislative  authorit}^, 
and  the  only  difficulty  is  that  the  statutory  formalities  have 
not  been  fully  complied  with,  an  obviously  different  ques- 
tion is  presented.  If  the  associates  have  endeavored  in  good 
faith  to  comply  with  the  requirements,  and  have  done  busi- 
ness as  a  corporation,  there  is  ample  reason  why  third  per- 
sons who  have  dealt  with  the  association  on  that  footing 
should  be  estopped  from  denying  its  corporate  existence. 
The  state  which  prescribed  the  formalities  may  indeed  com- 
plain of  their  non-observance;  but  until  it  does  so,  third  per- 
sons should  not  be  permitted  to  interfere.     Until  the  state 

1  Eaton  V.  AValker  (1889),  76  Mich.  579,  43  N.  W.  Rep.  638,  6  L.  R.  A.  102. 

10 


DEFIXITIOXS   AND    DISTINCTIONS. 


[§11. 


has  acted  in  the  matter  the  weight  of  modern  authority  re- 
gards the  association  as  at  least  a  corporation  de  facto,  and 
its  members  are  not  liable  as  partners.^ 

The  authorities  which  sustain  this  rule  do  not  by  any 
means  concede  that  the  formalities  prescribed  may  lightly 
be  ignored.  There  must  be  an  actual  and  honajide  attempt 
at  compliance,  and  without  this  the  de  facto  corporation  will 
not  exist.^ 


iFinnegan  v.  Noerenberg 
(Knights  of  Labor  Bldg.  Ass'n) 
(1893),  52  Minn.  239,  53  N.  W.  Rep. 
1150,  38  Am.  St.  Rep.  552, 18  L.  R.  A. 
778,  Paige's  Cas.  on  Partn.  24;  Sni- 
der "s  Sons'  Co.  V.  Troy  (1890),  91 
Ala.  224,  8  So.  Rep.  658,  24  Am.  St. 
Rep.  887,  11  L.  R.  A.  515;  American 
Salt  Co.  V.  Heidenheimer  (1891), 
80  Tex.  344,  15  S.  W.  Rep.  1038,  26 
Am.  St.  Rep.  743;  Rutherford  v. 
Hill  (1892),  22  Oreg.  218,  29  Pac. 
Rep.  546,  29  Am.  St.  Rep.  596,  17  L. 
R.  A.  549;  Fay  v.  Noble  (1851),  7 
Cush.  (Mass.)  192;  Ward  v.  Brig- 
ham  (1879),  127  Mass.  24,  Paige's 
Cas.  on  Partn.  20;  Planters'  Bank  v. 
Padgett  (1882),  69  Ga.  159;  Gartside 
Coal  Co.  V.  Maxwell,  22  Fed.  Rep. 
197:  Re  Gibbs'  Estate  (1893),  157  Pa. 
St.  59,  27  Atl.  Rep.  383, 22  L.  R.  A.  276. 

2  Certain  of  the  cases  declare  that 
there  must  be  a  "  substantial "  com- 
pliance with  the  formalities,  or  a 
compliance  in  all  "material  re- 
spects." Kaiser  v.  Lawrence  Sav- 
ings Bank  (1881),  56  Iowa,  104,  41 
Am.  Rep.  85;  Mokelumne  Hill 
Mining  Co.  v.  Woodbury  (1859),  14 
CaL  424,  73  Am.  Dec.  658;  Hurt  v. 
Salisbury  (1874),  55  Mo.  310;  Bige- 
low  V.  Gregory  (1874),  73  III.  197, 
Paige's  Cas.  On  Partn.  28.  But,  as 
is  pointed  out  in  Re  Giljbs'  Estate 
(1893),  157  Pa.  St.  59, 27  Atl.  Rep.  383, 


22  L.  R.  A.  276,  "where  there  has 
been  a  substantial  compliance  with 
the  law,  the  corporation  is,  of 
course,  de  jure.'''  So,  in  Finnegan 
V.  Noerenberg,  cited  in  the  preced- 
ing note,  the  court  say:  "A  sub- 
stantial compliance  will  make  a 
corporation  de  jure.  But  there 
must  be  an  apparent  attempt  to 
perfect  an  organization  under  the 
law.  There  being  such  an  appai"- 
ent  attempt  to  perfect  an  organi- 
zation, the  failure  as  to  some 
substantial  requirement  will  pre- 
vent the  body  from  being  a  corpo- 
ration dejure;  but,  if  there  be  user 
pursuant  to  such  attempted  organi- 
zation, it  will  not  prevent  it  being 
a  corporation  de/acfo."  The  stat- 
ute may,  however,  make  strict 
compliance  with  some  or  all  of  the 
requirements  a  condition  prece- 
dent to  the  acquisition  of  any  cor- 
porate power,  and  in  such  cases 
there  cannot  be  even  a  de  facto 
corporation  without  compliance. 
Jones  v.  Aspen  Hardware  Co.  (1895), 

—  Col. ,  40  I'ac.  Rep.  457,  29  L. 

R.  A.  143.  And  in  many  of  tlio 
cases,  such  ak  those  first  cited  in 
this  note,  express  prohibitions  ex- 
isted against  cominen(!ing  business 
as  a  corporation  until  certain  re- 
quirements, like  the  filing  of  the 
article.s,  were  complied  with. 


11 


§§  12,  13.]  LAW    OF    PARTNERSHIP. 

The  requisites,  then,  of  the  de  facto  corporation  are  these: 
1.  A  valid  law  under  which  a  corporation  with  the  powers 
assumed  might  lawfully  be  created ;  2.  An  actual  and  lona 
jlde  attempt  to  comply  with  the  prescribed  requirements ; 
and  3.  The  exercise  of  corporate  powers  in  pursuance  of 
such  attempt. 

§12.  Promoters  of  companies.— Promoters  of  corpora- 
tions are  not  partners.  Though  engaged  in  endeavoring  to 
secure  the  organization  of  a  company  to  carry  on  business 
for  pecuniary  profit,  their  immediate  object  is  not  the  trans- 
action of  business  for  mutual  gain,  and  they  do  not  fall 
within  the  definition  or  the  purposes  of  partnership.^ 

§  13.  Contemplated  partnersliips.— Amere  intention  to 
form  a  partnership  does  not  constitute  one.     Persons,  there- 
fore, who  are  merely  contemplating  a  future  partnership,  or 
who  have  simply  entered  into  an  agreement  to  thereafter 
become  partners,  cannot  be  held  liable  as  partners,  nor  have 
they  the  rights  of  partners  as  between  themselves.     Before 
this  result  can  ensue  the  executory  agreement  must  have 
been  executed.     As  declared  in  one  case,-  "  A  marked  dis- 
tinction exists  in  law  between  an  agreement  to  enter  into  the 
copartnership  relation  at  a  future  day  and  a  copartnership 
actually  consummated.     It  is  an  elementary  principle  that 
a  partnership  in  fact  cannot  be  predicated  upon  an  agree- 
ment to  enter  into  a  copartnership  at  a  future  day  unless  it 
be  shown  that  such  agreement  was  actually  consummated. 
In  the  language  of  the  text-books,  the  partnership  must  be 
'  launched.'     To  constitute  the  relation,  therefore,  the  agree- 
ment between  the  parties  must  be  an  executed  agreement. 
So  long  as  it  remains  executory  the  partnership  is  inchoate, 
not  having  been  called  into  being  by  the  concerted  action 
necessary  under  the  partnership  agreement.     It  is  undoubt- 

1  See  Reynell  v.  Lewis  (1846),  15  335,  24  Pac.  Eep.  681,  9  L.  R.  A, 
Mees.  &  Welsby,  517 ;  Capper's  Case  455.  See,  also,  Buzard  v.  McAnulty 
(1851),  1  Sim.  (N,  S.)  178.  (1890),  77  Tex.  438, 14  S.  W.  Rep.  138. 

2  Reed  V.  Meagher  (1890),  14  Colo. 

13 


DEFTXITIOXS    AND    DISTINCTIONS.  [§§  14,  15. 

edly  true  tliat  a  partnership  in prcesenti  may  be  constituted 
by  an  agreement  if  it  appears  that  such  was  the  intention 
of  the  parties.  But  where  it  expressly  appears  that  the 
arrangement  is  contingent,  or  is  to  take  effect  at  a  future 
da}'",  it  is  well  settled  that  the  relation  of  partners  does  not 
exist,  and  that,  if  one  or  more  of  them  refuse  to  perform  the 
agreement,  there  is  no  remedy  between  the  parties  except  a 
suit  in  equity  for  specific  performance,  or  an  action  at  law 
for  the  recovery  of  damages,  should  any  be  sustained." 

§  14.  Same  subject. —  The  mere  time  of  executing  the 
articles  is  not  conclusive,  for  persons  may  become  partners 
at  once,  if  such  is  the  intention,  even  though  partnership 
articles  are  thereafter  to  be  executed.  The  test  is  the  in- 
tention. If  it  is  the  intention  that  the  parties  are  not  to 
become  partners  until  the  terms  have  been  agreed  upon  and 
articles  executed,  the  partnership  will  not  come  into  exist- 
ence until  that  time,  unless  the  condition  is  waived;  but  if 
the  terms  have  been  agreed  upon,  the  execution  of  the 
articles,  or  the  performance  of  other  conditions,  may  be 
postponed  or  waived,  and  such  a  waiver  may  be  presumed 
where  the  parties  actually  begin  business  as  partners  before 
the  conditions  have  been  performed.^ 

§  15.  Classification  of  partnerships. —  Partnerships  are 
sometimes  classified  as  ordinary  partnerships,  limited  part- 
nerships, and  joint-stock  companies.  The  peculiarities  of  the 
latter  have  been  already  noticed.  Ordinary  partnerships 
may  be  divided  into  (1)  universal,  (2)  general,  and  (3)  special 
or  particular  partnerships, —  a  classification  corresponding 
to  that  of  agency,  and  based  upon  substantially  the  same 
distinctions.  An  universal  partnership  is  one  in  Avhich  all 
the  property  and  services  of  the  parties  are  united,  and  all 
profits,  however  made,  are  for  their  joint  benefit.  A  gen- 
eral partnership  is  one  created  for  the  [)urposes  of  some 

iCook  V.  Carpenter  (18C1),  34  Vt.     kins  v.  Hunt  (1843),  14  N.  II.  205, 
121,  80  Am.  Dec.  670;  Hartman  v.     Paige's  Cas.  on  Partn.  1. 
Woehr  (1807),  18  N.  J.  Eq.  383;  At- 

13 


§  16.]  LAW    OF    PARTNERSHIP. 

general  kind  of  business,  or  of  a  number  of  kinds  of  business. 
A  special  or  particular  partnership  is  one  created  for  a  single 
transaction  or  adventure. 

It  has  been  thought  that  an  universal  partnership  could 
exist  only  in  theory,  but  several  cases  have  occurred  in  this 
country  of  partnerships  which  w^ere  practically  universal. 
In  any  event,  however,  the  evidence  must  be  clear  to  estab- 
lish such  an  unusual  relation.^ 

§  16.  Classification  of  partners. —  In  limited  partnerships 

the  partners  are  either  (1)  {jeiieral,  or  (2)  sj^ecial^  the  former 
standing  in  the  attitude  of  an  ordinary  partner,  and  the 
latter  occupying  a  j)eculiar  position^  prescribed  by  statute, 
with  a  liability  limited  to  his  contribution. 

In  ordinary  partnerships,  partners  may  be  classified  as 
(1)  active  and  ostensible;  (2)  secret  or  dormant,  and'  (3)  nom- 
inal. 

An  ostensible  partner,  sometimes  called  a  public  partner, 
is  one  who  is  held  out  and  known  as  a  partner.  An  active 
partner  is  one  who  actually  participates  in  the  conduct  of 
the  business.  He  is  usually  an  ostensible  one,  but  is  not  nec- 
essarily so.  A  partner  may  be  unknown  or  concealed  and 
yet  active  in  the  management  of  the  business;  or  he  ma}^  be 
both  concealed  and  passive  as  to  the  conduct  of  the  busi- 
ness. In  the  former  case  he  is  said  to  be  a  secret  partner, 
and  in  the  latter  case  he  is  called  a  silent  or  dormant  part- 
ner. A  nominal  pai^tner  is  a  person  apparently  a  partner 
but  not  really  so.  A  person  who  leaves  an  existing  firm  is 
often  called  a  retiring  partner,  while  one  who  enters  such  a 
firm  is  called  an  incoming  partner. 

iSee  United  States  Bank  v.  Bin-  (1848),  20  Vt.  479,  50  Am.  Dec.  54; 
ney  (1828),  5  Mason  (U.  S.  C.  C).  183;  Goesele  v.  Bimeler  (1852),  14  How. 
Lyman  v.  Lyman  (1829),  2  Paine  (U.  S.)  589;  Gray  v.  Palmer  (1858), 
(U.  S.  C.  C),  11;  Rice  v.  Barnard    9  Cal.  616. 

14 


CHAPTEK  ir. 

FOR  WHAT  PURPOSES  A  PARTNERSHIP  MAY  BE   CREATED. 


17.  May  be  created  for  carrying 

on  any  lawful  business. 

18.  But  not  for  purposes  unlaw- 

ful or   opposed  to  public 
policy. 


§  19.  Purposes  illegal  in  part. 
20.  Effect  of  illegality. 


§  17.  For  any  lawful  business. —  It  is  the  general  rule, 
analogous  to  that  of  agency,  that  a  partnership  may  be  created 
for  the  purpose  of  carrying  on  any  lawful  business,  and  that 
whatever  the  individual  partners  might  lawfully  do  if  acting 
separately  and  in  their  own  behalf,  they  may  lawfully  do  in 
partnership.  Thus,  there  may  be  a  partnership  for  carrying 
on  not  only  every  lawful  kind  of  trade  or  commerce,  but  also 
for  farming,  mining,  lumbering,  manufacturing,  and  the  like. 
Professional  occupations  like  that  of  the  lawyer,  physician, 
dentist  and  architect  may  also  be  carried  on  in  partnership, 
and  there  may  be  a  partnership  for  buying  and  selling  land.^ 

§  18.  Not  for  purposes  unlawful  or  opposed  to  public 
policy. —  But,  as  in  the  case  of  agency,  there  are  many  pur- 
poses for  which  the  relation  cannot  lawfully  be  created. 
Thus,  a  trust  personal  to  one  individual  cannot  be  executed 
by  a  partnership;  public  offices  cannot  be  held  in  partner- 
ship ;  aftd  a  partnership  cannot  be  lawfully  created  for  the 
doing  of  anything  which  is  illegal,  immoral  or  opposed  to 
public  policy.  Partnerships,  therefore,  for  the  purpose  of 
carrying  on  a  gambling  establishment ;  to  speculate  in  "  fut- 
ures ;  "  to  stifle  or  prevent  competition ;  to  carry  on  a  for- 
bidden occupation ;  to  hinder  or  delay  creditors ;  to  carry 
on  trade  with  belligerents  in  time  of  war;  to  carry  on  trade 
in  violation  of  the  navigation  laws;  and  the  like,  are  void.^ 

1  Chester  v.  Dickerson  (1873).  54    v.  Babcock  (1893),  05  Cal.  479.  30 
N.  Y.  1,  13  Am.  Rep.  050;  Flower  v.     Pac.  Rep.  605,  29  Am.  St.  Rep.  133, 
Barnekoff  (1890),  20  Oreg.  137,  ?5    10  L.  R.  A.  745. 
Pac.  Rep.  370,  11  L.  R.  A.  149;  Bates        2See  Gaston  v.  Drake  (1879),  14 

15 


§§  19,  20.]  LAW    OF    PARTNERSHIP. 

§  19.  Purposes  illegal  in  part. —  A  partnership  may  be 
organized  for  a  lawful  purpose,  and  yet  one  or  more  of  its 
undertakings  may  be  illegal,  or  it  may  seek  to  accomplish 
lawful  ends  by  unlawful  means.  In  such  cases  the  unlaw- 
ful part  only,  if  it  can  be  separated  from  the  residue,  will 
be  affected  b}^  the  illegality;  if  it  cannot  be  separated,  the 
whole  must  be  regarded  as  unlawful,^ 

§  20.  Effect  of  illegality. —  Courts  will  not  enforce  con- 
tracts having  for  their  purpose  or  tending  to  promote  illegal 
objects.  The  members  of  an  illegal  partnership  cannot  sue 
to  enforce  any  contract  tainted  by  the  illegality,  but  actions 
may  be  brought  against  the  members  of  such  a  partnership 
by  a  person  who  did  not  participate  in  the  illegality.  As 
between  themselves,  the  law  usually  leaves  the  members  of 
an  illegal  partnership  where  it  finds  them,  refusing  to  aid 
either  psbYty.  Courts  will  not,  therefore,  enforce  contribu- 
tion or  compel  an  accounting  of  their  illegal  affairs ;  -  though 
if  they  have  themselves  wound  up  the  affairs  and  agreed 
upon  the  account,  it  is  held  in  some  cases  that  the  courts 
will  then  compel  the  partner  having  the  funds  in  his  pos- 
session to  pay  over  to  his  partner  the  latter's  agreed  share, 
even  though  such  funds  were  acquired  in  unlawful  dealings.^ 
The  weight  of  authority,  however,  denies  relief  in  these 
cases  as  well  as  in  the  others.^ 

Nev.  175,  33  Am.  Rep.  548;   Davis  706,  Paige's  Partn.  Cas.  96;  Read  v. 

V.  Gelhaus  (1888),  44  Ohio  St.  69;  Smith  (1883),  60  Tex.  379,  Paige's 

Hunter  v.  Pfeiffer  (1886),  108  Ind.  Partn.  Cas.  91. 

197;  Watson  v.  Fletclier  (1850),  7  ^  Brooks  v.  Martin  (1864),  2  Wall. 

Gratt.  (Va.)  1;  Watson  v.  Murray  (U.   S.)    70;   Crescent    Ins.   Co.   v. 

(1872).  23  N.  J.  Eq.  257;  King  v.  Bear  (1887),  23  Fla.  50,  11  Am.  St. 

Winants  (1874),  71  N.  C.  469.  Rep.  331. 

1  See  Dunham  v.  Presby  (1876),  *  Sykes  v.  Beadon  (1879),  11  Ch. 
120  Mass.  285;  Anderson  v.  Powell  Div.  170;  Snell  v.  D wight  (1876), 
(1876),  44  Iowa,  20.  120  Mass.   9;  Jackson  v.   McLean 

2  Hunter  v.  Pfeiffer  (1886),  108  (1889),  100  Mo.  130,  13  S.  W.  Rep. 
Ind.  197;  Gould  v.  Kendall  (1884),  393;  Wood  worth  v.  Bennett,  supm; 
15  Neb.  549;  Woodworth  v.  Ben-  Hunter  v.  Pfeiffer,  supra;  Craft  v. 
uett  (1870),  43  N.  Y.  273,  8  Am.  Rep.  McConoughy  (1875),  79  111.  346. 

16 


CHAPTER  III. 

WHO  MAY  BE  PARTNERS. 

S  21.  In  general,  any  person  com-  §  26.  Corporations  as  partners, 

petent  to  contract.  27.  Firms  as  partners. 

22.  Aliens  as  partners.  2a  How   many   partners    there 

23.  Infants  as  partners.  maybe. 

24.  Insane  persons  as  partners.  29.  Of  the  delectus  personarum. 

25.  Married  women  as  partners.  30.  Of  sub-partnerships. 

§  21.  In  general,  any  person  competent  to  contract.— 

As  a  general  rule,  any  person  mdij  be  a  partner  who  is  capa- 
ble of  entering  into  contracts.  If  he  has  the  legal  ability  in 
his  own  right  and  in  his  individual  capacity  to  transact  the 
business  contemplated,  he  may  unite  with  another  person  to 
carry  on  that  business  in  partnership. 

This  being  the  general  rule,  it  is  unnecessary  to  pursue  it 
further  in  respect  of  normal  persons,  but  in  regard  to  those 
who  labor  under  some  general  disabilit^^,  more  particular 
mention  is  desirable.     Thus  — 

§  22.  Aliens  as  partners.  — Aliens  who  are  subjects  of  na- 
tions which  are  at  peace  with  each  other  may  enter  into 
partnership,  but  not  alien  enemies.  Upon  the  breaking  out 
of  war  between  their  respective  countries,  however,  their 
capacity  is  terminated,  and  their  partnership,  as  will  be  seen, 
is  suspended  if  not  dissolved.^ 

.  §  23.  Infants  as  partners.  —  An  infant  may  be  a  partner,^ 
but  his  contract  of  partnership  is  voidable,  and  he  may 
interpose  his  infancy  as  a  defense  against  personal  liability 
as  a  partner.     During  the  continuance  of  the  relation,  how- 

'  See  post,  %  2.10.  v.  Farr  (1879),  43  Mich.  134.     Ho 

2Bushv.  Linthicum(1882),59Md.     may  be  the  general  partner  in  a 

344;  Adams  v.  Beall  (1887),  07  Md.     limited  partnership.     Continental 

o3,  1  Am.  St.  Rep.  379;  Dunton  v.     National  Bank  v.  Strauss  (1803),  137 

Brown  (1875),  31  Mich.  182;  Osburn     N.  Y.  148,  5.-}3,  32  N.  R  Ron.  lOOG 

2  17 


§  23.]  LAW   OF   PAKTNEESHIP. 

ever,  he  has  all  of  the  rights  and  powers  of  a  partner.  Thus, 
he  has  equal  right,  with  his  copartner,  to  the  possession  of 
the  assets  of  the  firm ;  he  may  collect  and  pay  debts ;  and 
may  make  contracts  in  the  firm  name,  Avhich,  though  he 
may  repudiate  liability,  will  be  binding  upon  his  adult  co- 
partners and  upon  the  partnership  assets.'  He  is  entitled  to 
an  accounting  and  to  his  chare  of  the  profits  like  other  part- 
ners after  the  payment  of  the  debts. 

He  may  disaffirm  his  contract  of  partnership  and  avoid  per- 
sonal liability  as  a  partner  either  to  his  copartner^  or  third 
persons;*  but,  notwithstanding  such  disaffirmance,  it  is  held 
that  his  interest  in  the  partnership  property  remains  liable 
to  the  partnership  debts,**  and  if  he  has  paid  njoney  for  the 
privilege  of  being  admitted  into  the  business,  he  cannot,  it 
is  held,  after  continuing  in  the  business  for  a  period,  volun- 
tarily withdraw  and  recover  back  what  he  has  paid,  unless 
it  was  procured  from  him  by  fraud.-^  The  adult  partner 
cannot  repudiate  firm  contracts  made  by  the  infant  on  the 
ground  of  the  latter's  incapacity,  but  if  he  has  been  induced 

1  See  Bush  v.  Linthicum,  supra,  529. 10  So.  Rep.  62;  Bixler  v.  Kresge 
and  other  cases  cited  in  this  sen-  (1895),  169  Pa.  St.  405. 32  Atl.  Rep.  414, 
tion.  47  Am.  St.  Rep.  920.  Although  there 

2  Thus  his  infancy  is  a  good  de-  seems  to  be  some  difference  of  opin- 
fense  to  his  copartner's  action  for  ion,  the  weight  of  authority  is  to 
contribution.  Neal  v.  Berry  (1893),  the  effect  that  the  infant  may  dis- 
86Me.  193, 29  Atl.  Rep.  987.  Whether  affirm  personal  contracts  and  con- 
the  infant  may  disaffirm  a  partner-  tracts  respecting  personal  property 
ship  obligation  to  a  third  person  before  as  well  as  after  he  arrives  at 
without  also  repudiating  the  part-  maturity.  See  Adams  v.  Beall: 
nership  relation  itself  seems  to  be  Folds  v.  Allardt;  Dunton  v.  Brown, 
disputed,  It  is  held  that  he  may  do  supra,  and  Shirk  v.  Shultz,  post. 
so,  in  Mehlhop  v.  Rae  (1894),  90  *  Lovell  v.  Beauchamp,  1894,  Ap. 
Iowa,  30,  57  N.  W.  Rep.  650.  Miller  Cas.  607 ;  Bush  v.  Linthicum,  supra ; 
V.  Sims  (1834),  3  Hill  (S.  C),  479,  is  Shirk  v.  Shultz  (1887),  113  Ind.  571; 
contra.  Yates  v.  Lyon  (1874),  61  N.  Y.  344; 

*  Bush  V.  Linthicum,  supra;  Folds  Pelletier  v.  Couture  (1889),  148  Mass. 
V.  Allardt  (1886),  35  Minn.  488,  26  269,  19  N.  E.  Rep.  400, 1  L.  R.  A.  863. 
N.  W.  Rep.  201 ;  Mehlhop  v.  Rae  5  Adams  v.  Beall  (1887),  67  Md.  53, 
(1894),  90  Iowa,  30,  57  N.  W.  Rep.  1  Am.  St.  Rep.  379.  But  see  Spar- 
650;  Foot  v.  Goldman  (1891),  68  Miss,     man  v.  Keim  (1880),  83  N.  Y.  345. 

18 


^VHO    MAY    BE    PARTNERS.  [§§  24,  25. 

to  enter  into  the  partnership  b}'  the  infant's  fraudulent  rep- 
resentation that  he  is  of  ago,  he  may  dissolve  the  partnership 
for  that  reason. 

After  he  becomes  of  age,  the  infant  partner  may  ratify  the 
partnership  transactions  and  thus  become  liable  for  obliga- 
tions incurred  during  his  minority.  Ilis  ratification  need 
not  be  express  unless  a  statute  so  requires,  but  may  be  in- 
ferred from  his  acts  and  conduct,  as  from  his  dealing  with 
the  subject-matter  of  the  contract  after  attaining  majority. 
Whether  his  continuing  to  act  as  a  partner  after  becoming 
of  age  is  of  itself  enough  to  constitute  a  ratification  has 
been  doubted.^  In  actions  by  and  against  the  partnership, 
the  infant  partner  should  usually  be  made  a  party,  though 
the  English  and  many  of  the  American  courts  have  held  it 
improper  to  make  an  infant  partner  a  defendant  in  an  ac- 
tion against  the  firm.^ 

§  24.  Insane  persons  as  partners. — The  partnership  con- 
tract of  an  insane  person,  like  his  other  contracts,  is  void- 
able; but  if  the  other  party  was  ignorant  of  the  insanit}'^,  and 
the  contract  has  been  executed  and  appears  to  be  fair,  the 
contract  of  an  insane  person  cannot  be  set  aside  unless  the 
parties  can  be  restored  to  their  original  condition.'^ 

§  25.  Married  women  as  partners. —  At  common  law,  a 
married  woman  was  incapable  of  making  contracts,  except 
where  she  had  a  separate  estate  or  except  where  her  husband 
was  a  convicted  felon,  or  was  an  alien  enemy  and  abroad,  or 
when  husband  and  wife  were  judicially  separated.  Her  ca- 
pacity to  enter  into  partnership  was  suljject  to  the  same 
limitations.     In  most  of  the  states  her  incai)acity  to  make 

•  Upon  the  question  of  ratifica-  notes;  Osburn  v.  Fair  (1879),  42 
tion,  see  Salinas  v.  Bennett  (18'J0),    Mich.  134. 

33  S.  C.  285, 11 S.  E.  Rep.  968;  Dana  3  See  Behrens  v.  McKenzie  (18U7), 
V.  Stearns  (1849),  3  Cush.  (Mass.)  23  Iowa,  333,  93  Am.  Dec.  428;  Fay 
372.  •  V.  Burditt  (1882).   81  IncL   433,  42 

-  See  1  Chitty  on  Pleading,  pp.  Am.  Rep.  142.  As  to  the  effect  of 
14  and  50,  and  notes:  1  Lindley  on  subsctjiu-ntly  occurring  insanity 
Parto.  (2d  Am.  ed.,  Ewell),  74  and    upon    the    partnership,   see    iwnt, 

§246. 
19 


§26.] 


LAW    OF    PAETNERCHIP. 


contracts  has  been  more  or  less  removed  by  statute,  and  she 
may  enter  into  partnership  with  persons  other  than  her  hus- 
band under  substantially  the  same  conditions  which  now  ap- 
ply to  any  other  of  her  contracts.^  She  could  not,  at  common 
law,  be  a  partner  with  her  husband,  and,  even  under  the  mod- 
ern statutes,  the  same  disability  still  continues  in  most  states.'^ 

§  26.  Corporations  as  partners. —  A  corporation  has,  as 
such,  no  implied  power  to  enter  into  partnership  either  with 
an  individual,  a  firm,  or  another  corporation.^  Authority 
for  this  purpose  must  be  expressly  conferred.*  But,  within 
its  corporate  power,  a  corporation  and  an  individual  may  so 
contract  as  to  incur  a  joint  liability  without  actually  enter- 
ing into  partnership.'^ 


iVail  V.  Winterstein  (1892),  94 
Mich.  230,  53  N.  W.  Rep.  932,  18 
L.  R.  A.  515.  Contra,  in  South 
Carolina,  Vannerson  v.  Cheatham 
(1894),  44  S.  C.  — ,  19  S.  E.  Rep.  614. 

2  That  she  cannot  be  a  partner 
with  her  husband,  see  Artman  v. 
Ferguson  (1888),  73  Mich.  146,  16 
Am.  St.  Rep.  572, 2  L.  R.  A.  343;  Gil- 
kerson-Sloss  Com.  Co.  v,  Salinger 
(1892),  56  Ark.  294, 16  L.  R.  A.  526,  35 
Am.  St.  Rep.  105 ;  Seattle  Board  of 
Trade  v.  Hayden  (1892),  4  Wash. 
263,  16  L.  R.  A.  530, 31  Am.  St.  Rep. 
919;  Fuller  v.  McHenry  (1892),  83 
Wis.  573,  18  L.  R.  A.  512;  Bowker 
V.  Bradford  (1885),  140  Mass.  521; 
Payne  v.  Thompson  (1886),  44  Ohio 
St.  192;  Scarlett  v.  Snodgrass  (1883), 
92  Ind.  262;  Carey  v.  Burruss  (1882), 
20  W.  Va.  571,  43  Am.  Rep.  790. 
That  she  may  be  a  partner  with 
her  husband,  see  Suan  v.  Cafife 
(1890),  122  N.  Y.  308,  25  N.  E.  Rep. 
488,  9  L.  R.  A.  593;  Louisville  R. 

Co.  V.  Alexander  (1894),  —  Ky. , 

27  S.  W.  Rep.  981 ;  Belser  v.  Tus- 
cumbia  Banking  Co.  (1895),  —  Ala. 
— ,  17  So.  Rep.  40;  Dressel  v.  Lons- 


dale (1892),  46  111.  Ap.  454;  Lane  v. 
Bishop  (1893),  65  Vt.  575,  27  Atl. 
Rep.  499.  In  Tennessee,  see  Theus 
V.  Dugger  (1893),  93  Tenu.  41,  23 
S.  W.  Rep.  135.  In  Maine,  see 
Bird  Co.  v.  Hurley  (1895),  87  Me. 
579,  33  Atl.  Rep.  164. 

^Whittenton  Mills  v.  Upton 
(1858).  10  Gray  (Mass.),  582,  71  Am. 
Dec.  681;  People  v.  Sugar  Refining 
Co.  (1890),  121  N.  Y.  582,  18  Am.  St. 
Rep.  843,  9  L.  R.  A.  33;  Gunn  v. 
Railroad  Co.  (1885),  74  Ga.  509; 
Hackett  v.  Multnomah  Ry.  (1885), 
12  Greg.  124,  6  Pac.  Rep.  659,  53 
Am.  Rep.  327;  Mallory  v.  Oil 
Works  (1888),  86  Tenn.  598,  8  S.  W. 
Rep.  896;  Morris  Run  Coal  Co.  v. 
Barclay  Coal  Co.  (1871),  68  Pa.  St. 
173,  8  Am.  Rep.  159. 

^Butler  V.  American  Toy  Co. 
(1878),  46  Conn.  136. 

5  In  Cleveland  Paper  Co.  v.  Cour- 
ier Co.  (1887),  67  Mich.  152,  34 
N.  W.  Rep.  556,  the  court  say :  "  A 
corporation  may,  in  furtherance  of 
the  object  of  its  creation,  contract 
with  an  individual,  though  the  ef- 
fect of  the  contract  may  be  to  im- 


20 


■WHO   MAT    BE    PAKTXERS.  "        [§§  27-20. 

§  27.  Firms  as  partuers,— Two  or  more  firms  may  enter 
into  partnership,  and  a  firm  may  also  enter  into  partnership 
"with  an  individual.  As  respects  third  persons,  the  associat- 
ing firms  ordinarily  lose  their  separate  identity,  and  each 
member  of  each  firm  is  liable  as  a  partner  in  the  joint  firm; 
but  as  between  themselves,  for  the  purposes  of  accounting 
and  the  division  of  profits  or  losses,  the  respective  firms  may 
be  regarded  as  the  partners,^ 

§  28.  How  many  partners  there  may  be. —  In  the  ab- 
sence of  a  statute  fixing  the  limit,  the  partnership  may  be 
composed  of  any  number  of  partners,  though  there  must, 
of  course,  be  more  than  one.- 

§29.  Of  the  delectus  personarum.  —  Partnership  being 
founded  on  the  agreement  of  the  parties,  and  being  a  rela- 
tion demanding  mutual  confidence  and  trust,  it  is  clear  that 
a  person  cannot  become  a  member  of  a  firm  without  the 
consent  of  the  other  members.  Hence,  one  partner  cannot 
introduce  a  third  person  into  the  firm  without  the  consent 
of  the  others,'  nor  upon  the  death  of  one  partner  can  his 
personal  representative  become  a  partner  with  the  surviv- 
ors, except  with  their  consent.*  A  sale  of  one  partners  in- 
terest does  not,  therefore,  make  his  transferee  a  partner,  but 
dissolves  the  firm.' 

Consent  to  the  admission  of  new  partners  or,  in  case  of 
death,  of  the  personal  representative,  may  be  given  in  ad- 
vance, as  by  being  stipulated  for  in  the  partnership  articles. 

To  the  rule  requiring  this  choice  of  persons  {delectus  j^^r- 
sonarum)  there  are  two  exceptions  —  one  usually  statutory, 

pose  upon  the  company  the  liability  6o2;  Raymond  v.  Putnam  (1H02),  44 

of  a  partner."  N.  H.  100. 

Jin  re  Hamilton   (1880),  1  Fed.  -'Stirling    v.    Ileintznuin    (1880), 

Rep.    800;     Simonton    v.    McLain  42  Mich.  449. 

(1885),  37  La.  Ann.  G03;  Bullock  v.  3  Love  v.  Payne  (1880),  73  Ind.bO, 

Hubbard  (1863).  23  Cal.  495,  83  Am.  38  Am.  Rep.  111. 

Dec.  130;  Meyer  v,  Krohn   (1885),  *  See  jjos^  §  245. 

114  111.  574,  2  N.  E.  Rep.  495;  Moa-  ^^aapost,  §  243. 
dor  V.  Hughes  (1879),  14  Uush  (Ky.), 

31 


§  30,]  LAW    OF   PAKTNEKSHIP. 

and  the  other  customary,  viz.,  jomt-stock  companies  and 
mining  partnerships.  In  these  a  transfer  of  one  partner's 
share  or  his  death  does  not  operate  as  a  dissolution,  but  his 
transferee  or  representative  may  be  received  as  a  partner.^ 

§  30.  Of  sub-partnersliips. —  One  or  more  of  the  partners 
of  a  firm,  less  than  the  whole  number,  may  unite  with  a  third 
person  to  form  a  partnership  as  to  the  interest  of  such  part- 
ner or  partners.  Such  a  partnership  is  frequently  called  a 
sub-partnership,  and  the  third  person  so  associating  with  the 
partner  is  often  called  a  sub-partner.  "  A  sub-partnership," 
says  Mr.  Justice  Lindley,^  "  is,  as  it  were,  a  partnership  within 
a  partnership ;  it  presupposes  the  existence  of  a  partnership 
to  which  it  is  itself  subordinate."  It  has  all  of  the  character- 
isticiirof  a  partnership  as  between  the  immediate  parties  to 
it,  but  the  third  person  does  not  thereby  become  a  partner 
in  the  original  firm,^  he  is  not  liable  as  such  to  creditors  of 
the  original  firm,^  and  he  has  no  right  of  accounting  as  a 
partner  against  the  original  firm,  but  only  against  such  mem- 
bers of  it  as  united  with  him  to  form  the  sub-partnership.^ 

1  Kahn  v.  Smelting  Co.,  102  U.  S.  the  assets  as  to  give  him  the  right 
641;  Skillman  v.  Lachman  (1863),  to  an  accounting  upon  dissolution. 
23  Cal.  198,  83  Am.  Dec.  96,  and  Nirdlinger  v.  Bernheimer  (1892), 
note;  Harris  v.  Lloyd  (1891),  11  133  N.  Y.  45,  30  N.  E.  Rep.  561.  "A 
Mont.  390,  28  Am.  St.  Rep.  475.  sub-partnership  does  not  in  fact 

2  Lindley  on  Partnersliip  (Ewell's  exist  where  one  party  furnishes 
2d  Am.  ed.),  vol.  I,  p.  48.  all   the    capital,   receives    all  the 

^  Setzer  v.  Beale  (1882),  19  W.  Va.  profits,  and   owns  all  the   assets. 

274;  Meyer  v.  Krohn  (1885),  114  111.  Such  an  arrangement  lacks  all  the 

574,  2  N.  E.  Rep.  495.     See  Miller  v.  essential  elements  of  a  partnership. 

Rapp  (1893),  135  Ind.  614,  35  N.  E.  The    ostensible    partner,   in   such 

Rep.  963.  case,  may  be  held  liable  to  third 

•*  Burnett  v.  Snyder  (1880),  81  N,  parties  on  the  ground  that  he  has 

Y.  550,  37  Am.  Rep.  527;  Riedeburg  held  himself  out  as  a  partner,  and 

V.  Schmitt  (1888),  71  Wis.  644,  34  they  have   treated   him  as  such; 

N.   W.   Rep.   336;   Setzer  v.  Beale  but  he  has  no  interest  which  will 

(1882),  19  W.  Va.  274.    Contra,  Fitch  entitle  him  to  an  accounting,  or  to 

V.     Harrington     (1859),    13     Gray  any  action  at  law   or  in   equity 

(Mass.),  468,  74  Am.  Dec.  641.  against  the  otiier  party."  Webb  v. 

s  The  sub-partner  may,  however,  Johnson   (1893),   95    Mich.   325,   54 

acquire  such  a  vested  interest  in  N.  W.  Rep.  947. 

32 


CHAPTER  lY. 

OF  THE  CONTRACT  OF  PARTNERSHIP  AND  THE  EVIDENCE 

THEREOF. 


§  31.  No  particular  formalities  re- 
quired. 

32.  How    contract    affected    by 

the  statute  of  frauds. 

33.  The    consideration    for    the 

contract. 


§  34.  When  the  contract  takes  ef- 
fect. 

35.  Question  of  partnership  one 

of  mixed  law  and  fact. 

36.  The  means  of  proof. 

37.  The  burden  of  proof. 


§  31.  No  particular  formalities  required. —  ISTo  particu- 
lar formalities  are  required  in  entering  into  the  contract  of 
partnership.  By  the  common  law,  no  official  act  or  cere- 
mony is  necessary ;  sealed  instruments  are  not  required,  and, 
except  in  those  cases  within  the  operation  of  the  statute  of 
frauds,  a  written  contract,  though  desirable,  is  not  essential. 

Express  agreement  is  not  necessary,  neither  is  it  essential 
that  the  parties  shall  have  had  a  conscious  intention  to  be- 
come partners.  The  relation  may  grow  out  of  transactions 
and  dealings  in  which  the  word  "partnership''  Avas  never 
uttered;  if  the  acts  or  contracts  of  the  parties  in  law  create 
partnership,  that  relation  will  ensue,  even  though  the  i)arties 
did  not  have  that  result  consciously  in  mind,  or  though  it 
was  consciously  in  their  intention  to  avoid  partnership.^ 

§  32.  How  affected  by  the  statute  of  frauds.—  Under 
the  fourth  section  of  the  statute  of  frauds,  an  agreement  to 
form  a  partnei'slii|)  in  the  future,  which  by  its  terms  is  not 
to  be  performed  within  one  year,  or  an  agreement  for  a 
present  ])artnership  to  continue  for  more  than  a  yenr  IVoiii 
its  commencement,  is  void  if  not  in  writing;  tliougli,  in 
either  case,  if  the  parties  have  acted  upon  the  agrcciucnt 


>  Jacobs  V.  Sliorey  (1808),  48  N.  H.  100,  !J7  Am.  Dec-.  58(5. 
23 


§^  33,  34,]  LAW    OF   PARTNERSHIP. 

and  become  pcartners,  their  relation  will  be  treated  as  a  part- 
nership at  will.^ 

With  respect  of  partnerships  in  lands,  there  is  some  con- 
flict as  to  the  a])plication  of  the  statute.  A  few  cases  hold 
that  such  a  partnership  cannot  be  created  without  writing; 
but  the  great  weight  of  modern  authority  is  to  the  efi'ect 
that  writing  is  hot  required,  and  also  that  if  a  partnership 
is  shown  to  exist  it  may  be  proved  by  parol  evidence  that 
its  property  consists  of  land.'- 

§  33.  Consideration  for  the  contract. —  The  contract  of 
partnership,  like  other  agreements,  requires  to  be  founded 
upon  some  consideration  in  order  to  be  binding.^  Anj  con- 
tribution in  the  shape  of  capital  or  labor,  or  any  act  .which 
may  result  in  liability  to  third  persons,  is  sufficient  for  the 
purpose.*  The  mutual  covenants  and  contributions  of  the 
parties  are  the  usual  consideration.  Their  contributions 
need  not,  of  course,  be  equal,  for  the  members  must  be  their 
own  judges  of  the  adequac}^  of  the  consideration.  Keither 
is  it  necessary  that  the  losses  shall  be  shared  equally  or  at 
all^  for,  as  will  be  seen,'^  one  partner  may  lawfully  indem- 
nify the  other  against  loss  by  the  enterprise. 

§  34.  When  the  contract  takes  effect. —  As  has  been  al- 
ready seen,**  a  mere  intention  to  form  a  partnership  does  not 
create  one;  that  intention  must  in  some  way  be  given  legal 
operation.  It  is  not,  of  course,  essential  that  formal  instru- 
ments shall  be  executed,  and  it  may  be  found  to  have  been 
the  intention  of  the  parties  to  launch  the  partnership  at 

iWahlv.Barnum  (1889),  116  N.Y.  v.    McCray  (1875),  51   Ind.  358,  19 

87,  22  N.  E.  Rep.  280,  5  L.  R.  A.  Am.  Rep.  735;  Flower  v.  Barnekoff 

623;  Morris  v.  Peckham  (1883),  51  (1890),  20  Ore.  132,  25  Pac.  Rep.  370, 

Conn.  128,  Paige's  Partn.  Cas.  114.  11  L.  R.  A.  149. 

'-2  See  Bates  v.  Babcock  (1892),  95  » See  Mitchell'  v.  O'Neale  (1869),  4 

Cal.  479,  29  Am.  St.  Rep.  133,  16  L.  Nev.  504,  Paige's  Partn.  Cas.  6. 

R.   A.  745;  Chester    v.   Dickerson  ^i   Lindley  on  Partnership  (2d 

(1873),   54   N.   Y,    1,    13  Am.   Rep.  Am.  ed.,  Ewell),  63. 

550;  Richards  v.  Grinnell  (1884),  63  5  See  po.sf,  §  51. 

Iowa,  44,  50  Am.  Rep.  727;  Holmes  ^  Spg  avi^e,  ^§  13,  14. 

24 


CONTRACT   OF   PARTNERSHIP  —  EVIDENCE.  [§  35. 

once,  notwithstanding  the  fact  that  regular  partnership  ar- 
ticles are  afterwards  to  be  prepared.^ 

Well-drawn  partnership  articles  will  name  the  day  upon 
which  the  partnership  is  to  begin;  but  in  the  absence  of 
such  a  stipulation,  or  of  any  articles  whatever,  recourse 
must  be  had  to  other  evidence.  Presumptively  in  such 
cases  the  date  of  the  commencement  will  be  the  day  on 
which  the  agreement  is  fully  and  definitely  consummated ;  ^ 
but  the  express  stipulation  of  the  parties,  or  the  circum- 
stances attending  the  case,  may  show  either  that  the  part- 
nership is  to  have  a  retroactive  operation,  or  that  it  is  not  to 
be  deemed  to  be  in  force  until  some  event  has  happened  or 
some  precedent  condition  has  been  complied  with.^  Con- 
ditions of  the  latter  sort,  however,  may  be  waived,  and  will 
be  held  to  be  so  where  the  partnership  is  actually  launched 
before  the  contemplated  time  arrives.^  So,  also,  where  the 
arrangement  contemplates  action  at  once  and  continuously, 
a  present  partnership  may  exist,  though  some  incidents  re- 
main to  be  determined  later.' 

§  35.  Question  of  the  existence  ot  a  partnersliip  one 
of  mixed  law  and  fact. —  The  question  whether  a  partner- 
ship exists  in  a  given  case  is  one  of  mixed  law  and  fact. 
What  constitutes  a  partnership  is  a  question  of  law ;  Avhether 
in  the  given  case  such  facts  exist  as  in  law  constitute  a  part- 
nership is  a  question  of  fact  if  the  facts  are  not  admitted; 
if  the  facts  are  admitted,  it  is  a  question  of  law."  Whether 
a  written  instrument  produced  creates  a  partnersliip  is  a  ques- 
tion of  construction  for  the  court."^ 

1  See  ante,  ^  14.  Crawford  (1895),  127  Mo.  356, 30  S.  W, 

2  See  Guice  v.   Thornton  (1884),    Rep.  1G3. 

76  Ala.  460.  ■*  See  First  National  Bank  v.  Cody 

a  See  Reed  v.  Meagher  (1890),  14  (1803),  93  Ga.  137,  19  S.  E.  Rop.  831. 

Colo.  335,  24  Pac.  Rep.  681,  9  L.  R.  3  See   Kerriek  v.  Stevens   (1884), 

A.  455;  National  Bank  v.  Cringan  55  Mich.  167,  20  N.  W.  Rep.  888. 

(1895),  —  Va.  — ,  21  S.  E.  Rep.  820;  «  Morgan  v.  Farrel  (1N89),  58  Conn. 

Latta  V.  Kilbourn  (1893),  150  U.  S.  413,  18  Am.  St.  Rep.  282. 

524,  37  L.  Ed.  1169,  14  Sup.  Ct.  Rep.  Uioston  Smelting  Co.  v.  Smith 

201;  Queen  City  Furniture  Co.  v.  (1880),  13  R.  1.  27,  43  Am.  Rei>.  3. 

25 


§  30.]  LAW    OF   PARTNERSHIP. 

§  36.  Means  of  proof.—  As  between  the  alleged  partners 
themselves,  the  existence  of  the  partnership  may  be  proved 
by  the  partnership  articles,  if  any ;  if  not,  by  informal  writ- 
ings, letters,  the  partnership  books,  the  conduct  and  admis- 
sions of  the  parties,  or  by  any  other  matters  te-nding  to  prove 
the  fact  in  controversy,  and  brought  home  to  the  party  to 
be  charged.^ 

As  to  third  persons,  the  existence  of  the  partnership  and 
the  persons  who  compose  it  may  be  proved  by  conduct,  ad- 
missions or  other  kinds  of  parol  evidence,  even  though  there 
were  partnership  articles.^ 

The  testimony  of  the  parties  themselves  as  to  the  facts  is, 
under  modern  rules,  admissible  either  to  prove  or  disprove 
the  alleged  partnership.* 

It  may  also  be  proved  by  the  conduct  or  admissions  of  the 
parties  sought  to  be  charged ;  ^  but  the  acts  or  admissions  of 
one  person  are  not  admissible  to  prove  another  to  be  a  part- 
ner, unless  the  latter  is  in  some  way  shown  to  be  responsible 
for  them  or  to  have  acquiesced  in  them.^  The  existence  of 
the  partnership  or  the  persons  composing  it  cannot  be  proved 
by  general  reputation,  rumor  or  hearsay.*' 

1  See  Greenleaf  on  Evidence,  vol.  the  party  sought  to  be  held  caused 

II,  §  475  et  seq. ;  Lindley  on  Part-  or  permitted  to  appear.    Morgan 

ner'ship  (Ewell's  2d  Am.  ed.),  vol.  I,  v.  Farrel  (1890),  58   Conn.  413,  20 

p.  80  et  seq.  Atl.  Rep.  614,  18  Am.  St.  Rep.  283. 

2 1  Lindley  on  Partnership  (Ew-  ^  The  declarations  or  admissions 

ell's  2d  Am.  ed.),  87;  2  Greenleaf,  of  one  person  that  another  is  his 

§  479.  partner  are  not  admissible  to  prove 

3  First  National  Bank  v.  Conway  that  fact  against  the  latter  person, 
(1886),  67  "Wis.  210,  30  N.  W.  Rep.  unless  he  has  in  some  way  author- 
215.  ized  or  assented  to  such  declara- 

4  Reed  v.  Cremer  (1886),  111  Pa.  tions.  Vanderhurst  v.  De  Witt 
St.  482,  56  Am.  Rep.  295,  where  it  is  (1892),  95  Cal.  57,  30  Pac.  Rep.  94,  20 
said  that  the  partnership  may  be  L.  R.  A.  595;  Button  v.  Woodman 
established  by  the  several  admis-  (1852),  9  Cush.  (Mass.)  255,  57  Am. 
sions  of  all  those  who  were  alleged  Dec.  46;  Grafton  Bank  v.  Moore 
to  compose  it,  or  by  the  admissions  (1842),  13  N.  H.  99,  38  Am.  Dec.  478. 
of  one  and  the  acts  and  declara-  ^ Brown  v.  Cmndall  (1835),  11 
tions  of  the  others.  But  the  facts  Conn.  92;  Bowen  v.  Rutherford 
relied  upon  must  be  those  which  (1871),  60  111.  41,  14  Am.  Rep.  25; 

26 


CONTRACT    or    PARTXEESIIIP EVIDENCE.  [§  37. 

In  seeking  to  establish  partnership  from  acts  and  conduct, 
a  wide  range  of  evidence  is  allowed  to  put  before  the  jury 
all  the  facts  and  circumstances  relating  to  the  connection  of 
the  alleged  partner  with  the  affair,  and  the  method  of  trans- 
acting the  business. 

§  37.  Burden  of  proof. —  The  burden  of  proving  the  ex- 
istence of  the  partnership  and  who  were  the  partners  com- 
posing it  rests  usually  upon  the  party  alleging  it.^  Where, 
however,  its  existencfe  is  shown  or  admitted,  a  presumption 
of  its  continuance  ordinarily  arises  which  casts  upon  the 
party  alleging  its  termination  the  burden  of  showing  that 
fact,  including  the  giving  of  proper  notice  where  that  is  nec- 
essary.^ 

Cook  V.  Slate  Co.  (1880),  36  Ohio  St.     Ky.  525,  9  S.  W.  Rep.  838;  Dunham 
135.   38  Am.   Rep.   568;    Potter  v.    v.  Loverock  (1893),  158  Pa.  St.  197, 
Greene  (1858),  9  Gray  (Mass.),  309,    38  Am.  St.  Rep.  838. 
69  Am.  Dec.  290.  '^See  post,  §  263. 

1  See  Lieb  v.  Craddock  (1888),  87 

27 


CHAPTEE  V. 


WHAT  ACTS  AND  CONTRACTS  CREATE  A  PARTNERSHIP. 


38.  How  question  arises. 

39.  Partnership  inter  se  and  as  to 

third  persons. 

I.  Of  True  Partnerships. 

40.  True  pai'taerships,  how  classi- 

fied. 

41.  Of  partnerships  expressly  in- 

tended. 

43.  Of  partnerships  not  expressly 
intended. 

43,  44.  Legal  intention  of  parties 
controls. 

45.  Tests  of  intention  to  form 
partnership. 

46-48,  Sharing  both  profits 

and  losses. 

49,  50.  Sharing  profits,  noth- 
ing being  said  about  losses. 

51.  Sharing  profits,  but  not 

losses. 

52.  Partnerships   in  profits 

only. 

53.  Sharing  gross  returns. 


54.  Tests  of  intention  —  Sharing 

losses  only. 

II.  Of  Quasi-Partnerships. 

55.  Of  partnerships  as  to  third 

persons. 
1.  Of  Sharing  Profits. 

56.  57.    Profit-sharing    formerly 

the  test  of  partnershij). 

58-60.  Of  the  case  of  Cox  v.  Hick- 
man. 

61.  Eftect  of  Cox  v.  Hickman  in 
England. 

62-68.  Effect  of  Cox  v.  Hickman 
in  United  States. 

Of  Holding  Out  as  a  Partner. 

69.  Person  may  become  liable  as 

a  partner  by  holding  out. 

70.  -^ —  What  facts  must  exist. 

71.  Who  may  enforce  liabil- 
ity. 

72.  — —  The  evidence  admissible. 

73.  -^  The  effect. 


§  38.  How  question  arises.—  The  question  as  to  the  exist- 
ence of  a  partnership  between  given  individuals  may  arise  in 
two  classes  of  cases  : 

1.  Where  the  parties  themselves  allege  that  they  intended 
partnership. 

2.  Where  the  parties  or  some  of  them  allege  that  they  did 
not  intend  partnership. 

§  39.  Partnerships  inter  sese  and  as  to  third  persons. — 

It  is,  in  general,  true  that  as  between  the  parties  to  the  al- 

38 


■WHAT   ACTS    CREATE   A    PAKTNERSHIP.        [§§  40,  41, 

legecl  relation  there  can  be  no  partnership  if  they  did  not 
intend  one,  and  that  as  to  third  persons  there  can  be  no  part- 
nership if  there  was  none  as  between  the  alleged  partners 
themselves.  Kotwithstanding  this  general  rule,  it  is  equally 
true,  as  will  be  hereafter  seen,  that  there  are  two  apparent 
exceptions  to  it : 

1.  Persons  may  be  held,  notwithstanding  a  contrary  in- 
tention, to  have  made  a  contract  which  in  law  constitutes 
them  partners  as  between  themselves;  and 

2,  A  person  who  is  not  actually  a  partner  ma}^  be  held 
liable  to  third  persons  as  though  he  were  a  partner  where 
he  has  so  conducted  himself  as  to  reasonably  induce  such 
third  persons  to  rely  upon  the  assumption  that  he  was  a 
partner. 

It  will  be  obvious  that  these  two  cases  are  very  different ; 
in  the  first  all  the  parties  are  held  to  be  partners  as  between 
themselves.,  while  in  the  second  a  person  maj^  be  held  liable 
as  a  partner  when  in  fact,  between  him  and  the  persons  with 
whom  he  is  thus  assumed  to  be  a  partner,  no  intention  to  be 
partners  existed.  The  first  form,  or  the  partnership  inter 
sese,  is  therefore  the  only  true  partnership.  This  has  led  to 
^a  classification  into,  1,  true  partnerships,  and  2,  (^wa5^-part- 
nerships. 

I.  Of  Tkue  Partnerships. 

§  40.  True  partnerships,  how  classified.— It  will  be  evi- 
dent that  true  partnerships  also  ma^y  be  divided  into  two 
classes :  1.  "Where  a  partnership  was  expressly  intended ;  and 
2.  AVhere  the  parties  did  not  expressly  intend  to  become 
partners,  but  the  law  holds  that  the  contract  which  they  in- 
tentionally made  does  create  a  partnership  between  tliem, 
and  which  thus  becomes,  indirectly,  an  intentional  partner- 
ship, because  the  law  always  presumes  that  parties  intended 
the  legal  result  of  their  intentional  acts.  These  two  classes 
will  be  separately  considered. 

§  41.  Of  partnerships  expressly  intended.— Cases  of  this 

nature  can  ordinarily  occasion  but  little  difiiculty.     If  it  bo 

•29 


g  42.1  LAAV    OF    PARTNERSHIP. 

admitted  that  the  parties  intended  to  be  partners,  their  in- 
tention can  rarely  fail  of  effect.  Cases,  however,  are  not 
infrequent  in  which  the  parties,  intending  to  create  a  part- 
nership and  expressly  naming  their  relation  such,  have  still 
been  held  not  to  have  created  one  because  they  had  failed 
to  attach  to  their  relation  the  necessary  incidents  of  partner- 
ship; as,  for  example,  where  their  contract  leaves  them  with- 
out any  community  of  interest  in  the  business  or  profits.^ 

It  may  also  be  that  an  instrument  designed  to  constitute 
partnership  articles  is  so  defectively  drawn  as  to  create  some 
other  relation,  as  a  co-ownership  or  a  corporation ;  but  un- 
less some  other  distinct  relation  is  thus  expressly  created, 
persons  who  have  intended  to  be  partners,  and  who  have 
acted  as  such,  will  be  deemed  to  be  partners  notwithstand- 
ing; defective  instruments. 

§  42.  Of  agreements  held  to  create  partnership  inter 
sese  when  that  was  not  intended.  — The  question  whether 
a  partnership  has  in  fact  been  created  between  two  or  more 
persons,  part  or  all  of  whom  deny  it,  may  arise  in  a  great 
variety  of  cases.  It  is  constantly  arising  as  between  the  al- 
leged partners  and  third  persons  who  are  seeking  to  hold 
them  liable  as  such,  and  this  phase  of  the  question  presents 
the  most  difficulty  and  gives  rise  to  the  greatest  amount  of 
litigation. 

1  Thus,  in  Sailors  v.  Nixon-Jones  community  of  interest  in  the  busi- 
Co.  (1886),  20  111.  App.  509,  Paige's  ness  or  profits,  they  are  not  part- 
Partn.  Cas.  39,  it  is  said:  "  The  fact  ners  in  fact  or  in  law.  Parsons  on 
that  the  parties  to  such  relation  Partnership,  91.  A  partnership 
themselves  call  it  a  partnership  inter  se  must  result  from  the  in- 
will  not  make  it  so.  Where  the  tention  of  the  parties  as  expressed 
question  of  partnership  is  to  be  de-  in  the  conti-act,  and  they  cannot 
termined  from  a  contract  between  be  made  to  assume  toward  each 
the  parties  to  it,  the  relation  must  other  a  relation  which  they  have 
be  found  from  the  terms  and  pro-  expressly  contracted  not  to  as- 
visions  of  the  contract,  and  even  sume.  The  terms  of  the  agree- 
though  parties  intend  to  become  ment,  where  there  is  one,  fixes  the 
partners,  yet,  if  they  so  frame  the  real  status  of  the  parties  toward 
terms  and  provisions  of  their  con-  each  other." 
tract  as  to  leave  them  without  any 

30 


WHAT    ACTS    CREATE    A    PARTNERSHIP.  [§  43. 

The  question,  however,  may  and  often  does  arise  as  be- 
tween the  alleged  partners  themselves.  As  between  these 
parties,  the  question  usually  arises  in  one  of  two  classes  of 
cases:  1.  Where  an  affair  in  which  they  have  been  in  some 
way  concerned  has  proven  to  be  profitable,  and  one  or  more, 
alleging  partnership,  seek  to  compel  an  accounting,  as  part- 
ners, from  the  others,  who  deny  it;  and  2.  Where  such  an 
enterprise  has  proved  disastrous,  and  one  or  more  alleg- 
ing partnership  seek  to  enforce  contribution  as  partners 
from  the  others,  who  deny  that  any  such  relation  existed. 
Other  cases  may,  of  course,  arise  where  one  or  more  claim 
other  rights  or  powers  as  partners  against  the  others,  but 
the  two  classes  of  cases  stated  are  the  most  common. 

§  43.  Legal  intention  of  parties  controls.— Partnership, 
as  has  been  seen,  is  the  result  of  the  express  or  implied 
agreement  of  the  parties,  and  there  can  be  no  partnership  — 
either  as  between  the  parties  themselves  or  as  to  third  per- 
sons—  where  the  parties  have  not  by  their  acts  or  contracts 
created  one.  When,  therefore,  the  parties  themselves,  or 
some  of  them,  deny  that  they  intended  to  form  a  partner- 
ship, it  becomes  necessary  to  determine  what  is  the  legal 
eifect  of  their  acts  and  contracts.  In  deahng  with  this  ques- 
tion, it  must  be  borne  in  mind  that  it  is  the  legal  intention 
of  the  parties  rather  than  their  expressed  or  declared  inten- 
tion which  controls.  The  law  presumes  that  the  parties 
intend  the  legal  consequences  of  their  voluntary  acts  and 
contracts.  If,  therefore,  they  intend  the  acts  or  contracts, 
they  intend  also,  in  contemplation  of  law,  the  legal  effect  of 
those  acts  and  contracts.'    Whether,  then,  the  quo  aion  arises 

1  Thus  in  Duryea  v.  Whitcomb  contract  could  not  be  varied  by 

(1858),  31  Vt.  393,   Paige's  Partn.  their  not  supposing  it  to  be  what 

Cas.  58,  the  court  say:    "If  their  it  was.     The  further  statement  in 

contract    was    for    a  partnership  the  report  that  they  did  not  intend 

by    necessary    legal    construction  to  form  a  partnership  seems  incon- 

(which  we  have  found  that  it  was),  sistent  with  the  otlier  facts.    .    .    . 

and  they   intended   to  make   the  Probably  tiie  fair  construction  of 

contract  (and   this  appears  from  the  report  is  tiiat  the  parties  were 

the  report),  the  legal  effect  of  their  not  aware  of  the  legal  extent  and 

81 


§  44.]  ■   LAW    OF    PARTNEESHIP. 

between  the  parties  themselves,  or  between  the  parties  and 
third  persons,  if  the  legal  effect  of  their  acts  and  contracts 
is  the  creation  of  a  partnership,  the  parties  will  be  deemed 
partners,  notwithstanding  their  denial  of  an  intention  to  be- 
come snch.  The  law  gathers  their  intention  from  their  acts 
and  contracts  at  the  time,  rather  than  from  their  contempo- 
raneous or  subsequent  assertions.  Greater  effect  may,  how- 
ever, be  given  to  the  expressed  intentions  of  the  parties 
when  the  question  arises  between  themselves  only,  than 
where  third  persons  are  concerned.  The  latter  cannot  be 
presumed  to  know  of  the  declared  intention,  and  must  there- 
fore be  left  to  judge  by  the  legal  intention  which  the  outward 
acts  and  contracts  of  the  parties  manifest.  In  doubtful  cases, 
too,  of  either  sort,  the  expressed  intention  may  be  of  conse- 
quence, and  may  even  turn  the  scale  in  accordance  with  it. 

§  44.  Same  subject. —  Keeping  these  distinctions  in  view, 
it  is  then  true,  as  the  rule  is  frequently  declared,  that 
whether  a  partnership  has  been  created  depends  upon  the 
real  intention  of  the  parties.  If  their  agreement  is  in  writ- 
ing, its  true  construction  must  be  ascertained.  If  it  is  not 
in  writing,  then  the  intention  of  the  parties  must  be  gathered 
from  their  words  and  conduct.  What  the  parties  have  called 
themselves  is  not  conclusive,  for  if  they  have  stipulated  for 
what  is  a  partnership  in  fact,  then  even  their  express  agree- 
ment that  they  should  not  be  partners  would  not  prevent 
the  legal  operation  of  their  stipulations.^     If,  on  the  other 

obligation    of    the    contract   into  Paige's  Partn.  Cas.  46,  after  calling 

which  they  entered.     As  the  con-  attention  to  the  fact  that  in  that 

tract  imports   a  partnership,   we  case  the  parties  manifestly  had  no 

must  hold,  in  the  absence  of  any  purpose  to  become  partners,  it  is 

express    stipulation    and    of    any  said  by  Cooley,  J. :  "  In  general  this 

other  circumstances  to  show  the  should  be  conclusive.     If  parties 

contrary,  that  they  intended  to  ere-  intend  no  jjartnership  the  courts 

ate  the  relation  which  the  contract  should  give  effect  to  their  intent, 

expresses."    See,  also,  Chapman  v.  unless  somebody  has  been  deceived 

Hughes  (1894),  104  Cal.  303.  by  their  acting  or  assuming  to  act 

1  Thus  in  Beecher  V.  Bush  (1881),  as  partners;    and  any  such  case 

45    Mich.    168,   40    Am.   Rep.   465,  must  stand  upon  its  peculiar  facts 

33 


^VHAT    ACTS    CREATE    A    PARTNERSHIP.        [§§  45,  10. 

hand,  their  acts  and  contracts  do  not  in  law  create  a  part- 
nership, the  fact  that  they  have  expressl}^  called  it  such  will 
not  avail.^ 

§45.  Tests  of  intention  to  form  partnership. —  "^hile 
the  intention  of  the  parties  is  thus,  in  general,  the  control- 
ling inquiry,  there  are  a  number  of  methods  by  which  the 
courts  hare  endeavored  to  ascertain  what  that  intention 
was.  Keeping  in  mind  the  definition  that  the  partnership 
relation  is  based  upon  the  agreement  of  the  parties  to  unite 
their  property,  labor,  capital  or  skill  in  carrying  on  business 
as  principals  for  their  joint  profit,  each  being  at  the  same 
time  both  principal  of  and  agent  for  the  other,  several  of  the 
tests  which  are  commonly  applied  to  aid  in  determining 
when  such  an  agreement  exists  may  be  noticed.  Among 
these  are  — 

§  46.  I.  Agreements  to  share  both  profits  and  losses. — 

An  agreement  between  two  or  more  persons  to  unite  their 
property,  labor  or  capital  to  establish  and  carry  on  a  busi- 
ness, in  which  business  they  are  to  have  a  community  of  in- 
terest —  which  they  are  to  own  in  common,  in  which  each  is 
to  be  a  principal  owner  or  proprietor  as  distinguished  from 
a  mere  agent,  clerk  or  creditor  —  and  the  profits  and  losses 
of  which  they  are  to  share  because  they  ai'c  such  owners, 
principals  or  proprietors,  is  the  typical  form  of  partnership. 
Such  an  agreement  creates  a  partnership  between  the  parties 
as  a  matter  of  law. 

and  upon  special  equities.  It  is,  the  substance  of  the  arrangement 
nevertheless,  possible  for  parties  to  shows  them  to  be  inapplicable, 
intend  no  partnership  and  yet  to  But  every  doubtful  case  must  be 
form  one.  If  they  agree  upon  an  solved  in  favor  of  their  intent; 
arrangement  which  is  a  partner-  otherwise  we  should  carry  the  doc- 
ship  in  fact,  it  is  of  no  importance  trine  of  constructive  jiartnership 
that  they  call  it  something  else,  or  so  far  as  to  render  it  a  trap  to  the 
tliat  they  even  expressly  declare  unwary.  Kent,  C  J.,  in  Post  v. 
that  they  are  not  to  be  partners.  Kimbcrly,  9  Johns.  (N.  Y.)470,  504." 
The  law  must  declare  what  is  tlie  'Sailoi-s  v.  Nixon-Jones  Co.,  20 
legal  import  of  tlieir  agreeniL'nts,  111.  Ap.  509,  Paige's  Parto.  Caa.  SU. 
and  names  go  for  nothing  when 
3                                              33 


, 


§§47,  48.]  LAW    OF   PARTNERSHIP. 

§  47.  Same  subject. —  Agreements,  however,  Avhich  pre- 
sent all  of  these  characteristics  occasion  no  difficulty,  and 
the  question  of  partnership  is  easily  and  certainly  solved. 
The  difficulty  arises  in  those  cases  —  which  unfortunately 
but  naturally  constitute  the  great  majority  of  those  submit- 
ted to  lawyers  or  courts  for  determination  —  in  which  some 
of  these  elements  only  are  discernible,  while  others  are  not 
apparent  at  all  or  are  to  be  extracted  from  a  mass  of  more 
or  less  conflicting  facts  and  circumstances.  In  such  cases, 
the  elements  which  do  appear  are  not  necessarily  conclusive, 
and  it  is  both  unwise  and  dangerous  to  seize  upon  them  as 
sufficient;  they  are  evidence  merely,  and,  as  such,  are  more 
or  less  convincing  according  as  they  fit  in  with  the  remain- 
ing elements  discovered. 

Of  this  nature  is  the  mere  element  of  sharing  profits  and 
losses.  It  certainly  furnishes  strong  evidence  that  the  par- 
ties have  united  as  principals  for  their  joint  profi,t,  if  any, 
and  in  the  absence  of  anj'thing  to  show  that  the  profits  and 
losses  were  to  be  shared  on  some  other  basis  than  that  of 
principals  in  the  business,  it  would  usuall}"  be  deemed  con- 
clusive. But  it  may  still  be  shown  that  they  were  to  share 
the  profits  and  losses  in  some  other  capacity,  and  the  evi- 
dence of  partnership  is  thereby  weakened  if  not  dispelled. 
"Where  both  parties  contribute  goods,  or  money  to  buy 
goods,  for  a  common  stock,  in  which  they  thus  acquire  a 
joint  interest,  then  an  agreement  for  a  division  of  the  profit 
and  loss  furnishes  the  strongest  evidence  of  a  partnership ; 
and  the  same  is  true  where  each  is  to  contribute  services. 

§  48.  Same  subject. —  The  evidence  is  also  strong  where 
one  furnishes  money  or  property  and  the  other  furnishes 
services,  though  it  is  less  strong  in  this  case  than  in  the 
others,  because  the  parties  have  not  necessarily  a  joint  in- 
terest in  the  property,  and  the  sharing  in  profits  and  loss 
may  be  but  one  means  of  compensating  the  second  party  for 
his  services.  Still  less  strong  is  the  evidence  where,  though 
the  parties  are  to  share  profits  and  losses  in  the  sale  of 

34 


AVHAT    ACTS    CREATE    A    PARTNERSHIP. 


[§i9. 


goods,  each  one  retains  the  individual  title  or  control  of  his 
contribution. 

To  constitute  a  partnership,  therefore,  there  must  be 
added  to  the  evidence  of  this  one  element  of  sharing  profits  j 
and  losses,  the  further  evidence  that  the  parties  who  sol 
shared  in  such  profits  and  losses  vrere  also  principal  pro- 
prietors in  the  business  from  which  such  profits  or  losses 
ensued,  and  that  such  sharing  was  because  they  stood  in  th« 
relation  of  such  principal  proprietors  and  not  in  some  othei 
relation.^ 

§  49.  II.  Agreements  to  share  profits,  notliing  being 
said  about  losses. —  It  not  infrequently  happens  that,  while 
the  element  of  profit  sharing  is  clearly  evident,  the  question 
of  sharing  losses  appears  to  have  been  ignored.  The  failure 
or  omission  to  provide  for  the  losses  may  have  been  acci- 
dental or  intentional.  If  it  was  accidental  merely,  it  is  ordi- 
narily of  little  consequence,  because  the  law  will  sujiply  the 
omission  if  the  other  elements  are  present.-  But  if  the  omis- 
sion was  intentional,  it  challenges  inquiry,  though  it  may 
not  be  conclusive.  Ordinarily  one  Avho  shares  the  profits  of 
the  Ijusiness  because  he  is  a  principal  therein,  must,  for  the 


iSpauMing  v.  Stubbings  (1893), 
86  Wis.  255,  56  N.  "W.  Rep.  469,  39 
Am.  St.  Rep.  888;  Culley  v.  Edwards 
(1884),  44  Ark.  423,  51  Am.  Rep.  614; 
Boston  Smelting  Co.  v.  Smith  (1880), 
13  R.  I.  27,  43  Am.  Rep.  8:  Clifton 
V.  Howard  (1886),  89  Mo.  192, 58  Am. 
Rep.  97;  Howze  v.  Patterson  (1875), 
53  Ala.  205,  25  Am.  Rep.  607.  In  a 
recent  case  in  Oregon  (Flower  v, 
Barnekoff  (1890),  20  Ore.  137,  11  L. 
R.  A.  149),  it  is  said:  "Partnership 
and  community  of  interest  inde- 
pendently considered  are  not  al- 
ways the  same  thing,  nor  is  a  mere 
community  of  interest  sufficient; 
but  there  must  be  an  agreement 
to  share  the  profits  and  loss,  and 


such  profits  must  be  shSir^d  as  the, 
result  of  thft  ^^fivpntnre  or  enter-_ 
]3rise.  in  whioh  both  are  interested. 
and  not  "'^r^y  ""  "  "^"'"""•"  '^f 
comgensatiflii. (Cogswell  v.  Wilson, 
11  Ore.  372);"  and  "where  it  ai>- 
pears  that  there  is  community  o£ 
interest  in  the  capital  stock,  and 
also  a  community  of  interest  in  the 
profits  and  loss,  there  it  is  clear  an 
actual  partnersliij)  exists  betiveen 
the  parties.  Berthold  v.  Goldsmith, 
24  How.  (U.  S.)  541." 

2  See  Quinn  v.  Quinn  (1889).  81 
Cal.  14,  22  Pac.  Rep.  264;  Wi|.i)er- 
man  v.  Stacy  (1891),  80  Wis.  345,  50 
N.  W.  Rei..  330. 


§  m 


LAW   OF   PARTNERSHIP. 


same  reason,  share  the  losses  also  if  loss  results.  But  it  is 
possible  that  one  may  share  the  profits  of  a  business  without 
being  a  proprietor  therein.  The  facts  must  therefore  be  in- 
vestigated further,  and  it  must  be  ascertained  why  and  in 
what  relation  the  profits  are  to  be  received. 

§  50.  S.ame  subject.—  Pursuing  the  investigation,  if  it  be 
found  that  the  parties  have  contributed  to  form  a  joint  stock 
or  capital  of  property  or  skill  or  labor,  and  have  in  the  busi- 
ness a  community  of  interest,  then  an  agreement  to  share 
])rofits  furnishes  very  strong  evidence  of  partnership.  But 
if  one  party  only  is  to  supply  the  stock  or  capital,  the  case 
is  not  so  clear,  though  it  is  not  conclusive.  If,  notwith- 
standing the  fact  that  one  is  to  furnish  all  the  capital  in  the 
first  instance,  it  still  appears  that  the  parties  are  to  own  the 
business  in  common,  or  are  to  have  a  common  interest  in  or 
power  of  control  over  it,  there  is  then  the  community  of  in- 
terest which  ordinarily  constitutes  partnership;*  but  if  there 


1  This  distinction  is  very  cleai'ly 
illustrated  in  such  cases  as  Magov- 
ern  v.  Robertson  (1889),  116  N.  Y. 
61,  22  N.  E.  Rep.  398.  5  L.  R.  A.  589, 
Avhere  the  parties  held  liable  as  part- 
ners had  not  only  a  right  to  share  in 
the  profits  but  had  also,  by  the  ex- 
press terms  of  the  contract,  an  in- 
terest in  the  stock  and  business  to 
the  extent  of  their  loans  and  in- 
dorsements. '-Persons,"  said  the 
court,  "having  a  proprietary  in- 
terest in  a  business  and  in  its  prof- 
its are  liable  as  partners  to  credit- 
ors." To  like  effect,  because  the 
alleged  clerk  was  not  only  to  have 
a  share  of  the  profits  as  compensa- 
tion, but  was  also  to  have  an  in- 
terest in  the  stock  and  business 
itself:  Sawyer  v.  First  National 
Bank  (1894).  114  N.  C.  13,  18  S.  E. 
Rep.  949;  Hackett  v.  Stanley  (1889), 
115  N.  Y.  625,  22  N.  E.  Rep.  745; 


and  because  the  alleged  loaner  of 
money  was  also  to  have  an  in- 
terest in  and  control  over  the  busi- 
ness: Spaulding  v.  Stubbings  (1893), 
86  Wis.  255,  56  N.  W.  Rep.  469,  39 
Am.  St.  Rep.  888. 

Care  must  therefore  be  taken  to 
discriminate  between  the  cases  of 
alleged  loans  with  a  share  of  the 
profits  by  way  of  interest,  and  a  real 
partnershijD  disguised  as  a  loan ;  for 
if  it  appears  that  the  transaction  is 
a  mere  device  to  obtain  the  advan- 
tages of  a  partnership  without  the 
responsibilities,  it  will  be  held  to 
be  a  partnership  whatever  the  par- 
ties may  have  called  it.  The  test 
is  usually  to  be  found,  according 
to  the  later  cases,  in  the  powers  of 
control  of  the  alleged  lender.  Has 
he  any  voice  or  part  in  controlling 
the  management  of  tlie  business 
as  a  ijrincipal  therein?    Has  he,  by 


86 


WHAT   ACTS   CREATE   A   PARTNEESHIP. 


[§50. 


his_sbare  of  tbej^rofits  in  some  other  capacity  than  as  a  priii-. 
cipal  proprietor,  as,  for  exaiin)le,  if  lio  is  to  receive  it  ascoiii-__ 
pensationfor_his_sexiices3  tlicrc  is  no  |iarlii(M'sliiji,  i'hjirily, 
also,  one  who  has  a  share  of  the  })r(»tits  iuanptiut's  business 
byjNvay  of  commission  inei-elx.  or  in  lieu  of  salar} ,  or  asrent, 
or  as  interest  on  loans,  is  iii»t  a  partner  witli  tije  owner  of 
that  business.'     To  malce  them  such,  there  must  be  here,  as 


virtue  of  the  arrangement,  such 
an  intei'est  in  the  business  tliat  he 
can  be  regarded  both  as  principal 
and  agent  for  the  others?  See  Ro- 
senfield  v.  Haight  (1881),  53  Wis. 
260.  40  Am.  Rep.  770;  Richardson 
V.  Hughitt  (1879),  76  N.  Y.  oo,  83 
xVm.  Rep.  267;  Leggett  v.  Hyde 
(1874),  58  N.  Y.  272,  17  Am.  Rep. 
244;  Hackett  v.  Stanley  (1889),  115 
N.  Y.  625 ;  and  especially,  Waverly 
Nat.  Bank  v.  Hall  (1892),  150  Pa. 
St.  466,  30  Am.  St.  Rep.  823,  and 
Magovern  v.  Robertson  (1889),  116 
N.  Y.  61,  5  L.  R.  A.  589.  So  care 
must  be  taken  to  discriminate  be^ 
tween  a  real  lease  of  premises  and 
a  partnership  disguised  under  the 
form  of  a  lease;  for  if  the  charac- 
teristics of  a  partnership  are  pres- 
ent, it  will  be  held  to  be  such  re- 
gardless of  what  the  parties  may 
have  called  it.  Webster  v.  Clarlt 
(1894),  34  Fla.  637,  16  So.  Rep.  601, 
43  Am.  St.  Rep.  217,  27  L.  R.  A.  126. 
'  See  Sodiker  v.  Applegate  (1884), 
24  W.  Va.  411,  49  Am.  Rep.  252; 
Beecher  v.  Bush  (1881),  45  Mich. 
188,  40  Am.  Rep.  405,  Paige's  Partn. 
Cas.  46;  McDonnell  v.  Battle  House 
Co.  (1880),  67  Ala.  90,  42  Am.  Rep. 
99;  Harvey  v.  Cliilds  (1870),  28  Ohio 
St.  319,  22  Am.  Rep.  387;  Thayer  v. 
Augustine  (1884),  55  Mich.  1«7,  54 
Am.   Rep.   361;  Morgan  v.  Farrel 


(1890),  58  Conn.  414.  20  Atl.  Rep. 
614,  18  Am.  St.  Rep.  282;  Waverly 
Nat.  Bank  v.  Hall  (1892),  150  Pa. 
St.  466,  24  Atl.  Rep.  665,  30  Am.  St. 
Rep.  823;  Boston  Smelting  Co.  v. 
Smith  (1880),  13  R.  I.  27,  43  Am. 
Rep.  3;  Parchen  v.  Anderson  (1885), 
3  Mont.  438,  51  Am.  Rep.  65;  Ci^l- 
ley  V.  Edwards  (1884),  44  Ark.  423, 
51  Am.  Rep.  614;  Waggoner  v. 
First  Nat.  Bank  (1894),  43  Neb.  84, 
61  N.  W^  Rep.  112.  In  respect  of 
sharing  profits  by  way  of  compear 
sation  for  services,  it  was  said  in 
Sodiker  v.  Applegate  (1884),  24 
W.  Va.  411,  49  Am.  Rep.  252,  siqjva: 
"  In  all  cases  there  must  be  a  par- 
ticipation as  principals.  If  the  per- 
sons merely  occupy  the  relation  of 
principal  and  agent,  employer  and 
employee  or  factor,  no  partnership 
can  be  predicated  upon  the  fact 
that  such  agent,  emi)loyee  or  fac- 
tor receives  a  part  or  share  of  the 
profits  for  his  service  or  other  ben- 
efits conferred.  This  proposition 
is  illustrated  by  numerous  cases, 
among  which  are  the  following: 
Berthold  v.  Goldsmith,  24  Ib.w. 
(U.  S.)  542;  Burckle  v.  Eckhart,  1 
Denio  (N.  Y.).  341;  Bowyer  v.  An- 
derson, 2  Leigh  (Va.),  .5.50;  Chap- 
line  V.  Conant,  3  W.  Va.  507,  1(»(> 
Am.  Dec.  766;  Dils  v.  Bridge,  23^ 
W.  Va.  20;  llanuaj^JCHTTTrrTCal. 


37 


§§  51,  52.]  LAW   OF   PARTNERSHIP. 

in  the  former  case,  a  community  of  interest  in  the  husiness 
itself  as  principals,  each  one  being  at  once  principal  of  and 
agent  for  the  others. 

§  51.  III.  Agreements  to  share  profits  with  express 
stipulation  against  losses. —  Agreements  are  sometimes 
made  by  which,  though  all  are  to  share  in  the  profits,  some 
of  the  parties  are  expressly  to  be  protected  against  loss. 
Such  an  agreement  may  constitute  a  partnership  if  the  other 
elements  are  present.  It  is  lawful  for  the  partners,  as  be- 
tween themselves,  to  stipulate  that  one  or  more  of  them 
shall  be  indemnified  against  loss,  though  such  a  stipulation 
cannot  affect  the  liability  of  the  partners  so  indemnified  to 
third  persons.^ 

§  52.  IV.  Partnership  in  profits  only. —  It  is  not  indis- 
pensable that  there  shall  be  a  common  stock  or  fund  of 
goods,  land  or  other  tangible  property.  The  contributions 
of  one  or  both  of  the  partners  may  be  simply  skill  or  expe- 
rience or  capacity  to  labor.  Even  if  tangible  property  is 
necessary  to  the  transaction  of  the  business,  it  is  not  essen- 
tial that  it  shall  be  owned  by  all  or  any  of  the  partners.  It 
may  be  hired  from  a  stranger,  or  one  partner  may  supply 
its  tise  to  the  firm,  retaining  the  title  in  himself.  It  may  be 
also  that  the  contract  contemplates  a  division  only  in  case 
there  are  profits  made,  and  that,  if  there  are  no  profits,  tlie 
expenses  or  losses  are  to  be  borne  by  one  only  or  by  both  in 
their  individual  capacity.  Each  of  these  cases,  and  others 
of  like  kind  which  are  legally  possible,  contemplate  co- 
ownership  only  in  the  results  of  the  enterprise  rather  than 
iu  the  enterprise  itself  or  the  means  of  conducting  it,  and 
they  are  frequently  spoken  of  as  partnerships  in  the  profits 
onlv. 

73;  Morgan  v.  Stearns,  41  Vt.  397."  7  Ala.  761;  Consolidated  Bank  v. 

See,  also,  Buzard  v.  Bank  of  Green-  State  (1850),  5  La.  Ann.  44;  Baxter 

ville  (1886),  67  Tex.  83, 60  Am.  Rep.  7.  v.  Hart  (1894),  104  Cal.  344,  37  Pac. 

1  See  Brown  v.  Tapscott  (1840),  6  Rep.  941 ;  Robbins  v.  Laswell  (1862), 

Mees.  &  Welsby,  119,  Ames'  Partn.  27  111.  365,  Paige's  Partn.  Cas.  79. 
Cas.  468;  Pollard  v.  Stanton  (1845), 

"      38 


WHAT   ACTS    CREATE   A   PARTNERSHIP.  [§53- 

Such  a  partnership  differs  from  others  in  degree  only  and 
not  in  kind.  To  the  extent  of  the  community  of  interest  — 
whether  it  be  in  profits  only  or  more  —  there  is  a  partner- 
ship with  its  incident  rights  and  liabilities.^ 

§  53.  T.  Agreements  to  share  gross  returns.—  Persons 
who  contribute  property  or  funds  for  a  common  enterprise 
and  agree  to  share  the  gross  returns  of  that  enterprise  in 
proportion  to  their  contributions,  but  who  severally  retain 
the  title  to  their  respective  contributions,  are  not  thereby 
rendered  partners.  They  have  no  common  stock  or  capital, 
and  no  community  of  interest  as  principal  proprietors  in  the 
business  itself  from  which  the  proceeds  are  derived. 

Thus,  co-owners  who  divide  the  earnings  of  a  chattel  are 
not  partners ;  nor  are  sailors  who  divide  the  products  of  a 
voyage;  or  persons  farming  land  on  shares;  or  two  or  more 
coach-owners  who  pay  their  own  expenses  but  divide  the 
gross  receipts  of  their  respective  lines  of  coaches  in  propor- 
tion to  the  respective  earnings  of  each  line;  or  two  or  more 
railroad  companies  who  unite  to  form  a  continuous. line  of 
carriage,  each  paying  its  own  expenses  but  dividing  the  re- 
ceipts in  proportion  to  the  length  of  their  respective  lines ; 
or  the  lessee  and  the  manager  of  a  theater  Avho  share  the 
gross  receipts;  or  Avorkmen  who  build  a  chattel  in  common 
and  divide  the  receipts ;  or  persons  one  of  whom  furnishes 
a  mill  or  a  brick-yard  and  the  other  supplies  the  labor  and 
materials  to  operate  it  and  who  divide  the  product;  or  per- 
sons who  unite  to  buy  land  or  chattels  to  be  sold  and  the 
profits  divided ;  or  persons  one  of  whom  furnishes  a  ])lant 
or  outfit  while  the  other  runs  it,  the  profits  being  divick-d. 
Neither  is  a  person  a  partner  who  leases  property  for  a 
share  in  the  gross  receipts,  as  where  one  lets  a  liotel  or  a 
vessel  or  machinery,  receiving  a  share  of  the  returns  as  rent.- 

iSee  Roltbins  v.  Laswell  (18C2),  Jones  (18G1),  2!)  N.  J.  L.  270,  Paige's 

27  111.  mn,  Paiges  Paitn.  Cas.  79;  Paitn.  Cas.  70. 

Stevens  v.  I'ducet  (1800;,  24  111.  483,  '^Sef  French  v.  Styling  (18r,7),  2 

Paige's  Partn.  Cas.  64;  Voorhees  v.  Com.  15.  (N.  S.)  357,  Ames'  Cases  on 


§§  0-1,  55.] 


LAW    OF   PAE3 


§54.  VI.  Agreenieuts  to  share  losses  oiilj. —  An  agree- 
ment to  share  losses  or  expenses  only  does  not  nsually  con- 
stitute a  partnership.  Thus,  an  agreement  between  two 
raih'oad  companies  that  any  injury  to  persons  or  goods  on 
the  line  of  either  shall  be  borne  by  the  company  on  whose 
road  it  occurs,  and  that  when  the  place  of  injury  cannot  be 
determined  the  loss  shall  be  borne  by  both  in  the  pro])or- 
tions  in  which  they  share  the  through  rates  for  carriage, 
does  not  make  the  companies  partners.^ 


II.    Of    QrASI-PAKTXEKSHIPS. 

§  55.  Of  partnersliips  as  to  third  persons.— Wheuever 
there  is  a  partnership  as  between  the  parties, —  and  this,  as 


^artn.  41  (dividing  the  earnings  of 
a  race-borse) ;  Mair  v.  Glennie  (1815), 
4  Maule  &  Sel.  240  (sailors);  Cham- 
pion V.  Bostwick  (1837),  18  Wend. 
(N.  Y.)  175,  31  Am.  Dec.  376:  East- 
man V.  Clark  (1873),  53  N.  H.  276, 
16  Am.  Rep.  192  (coach-owners); 
Irvin  V.  Railroad  Co.  (1879),  92  111. 
103,  34  Am.  Rep.  116  (railroad  com- 
panies); Lyon  V.  Kuowles  (1863),  3 
Best  &  Sm.  556  (theater);  Hawkins 
V.  Mclntyre  (1873^,  45  Vt.  496  (work- 
men); Nelms  V.  McGraw  (1890),  93 
Ala.  245,  9  So.  Rep.  719;  Robinson 
V.  Bullock  (1877),  58  Ala.  618  (mill); 
Lamont  v.  Fullam  (1883),  133  Mass. 
583  (brick-yard):  Bruce  v.  Hast- 
ings (1868),  41  Vt.  380;  Munson  v. 
Sears  (1861),  12  Iowa,  172  (land 
cases).  But  there  may  be  a  part- 
nership in  buying  land  to  s:ll 
again.  See  Flower  v.  Barnekoff 
(1890),  20  Ore.  137,  11  L.  R.  A.  149; 
Bates  V.  Babcock  (1892),  95  Cal.  479, 
29  Am.  St.  Rep.  133.  Goell  v.  Morse 
(1879),  126  3Iass.  480  (chattel  to  be 
resold);    Quackenbush  v.   Sawyer 


(1880),  54  Cal.  439  (circus  run  by  one 
and  income  divided);  Beecher  v. 
Bush  (1881),  45  Mich.  188,  40  Am. 
Rep.  465:  O'Donnell  v.  Battle  House 
Co.  (1880),  67  Ala.  90, 42  Am.  Rep.  99; 
Miles  Co.  V.  Gordon  (1894),  8  Wash. 
442,  36  Pac.  Rep.  265  (hotel  cases); 
Cutler  V.  Wiusor  (1828),  6  Pick. 
(Mass.)  335,  17  Am.  Dec.  385  (ves- 
sel); Day  V.  Stevens  (1883).  88  N.  C. 
83,  43  Am.  Rep.  732;  Putnam  v. 
Wise  (1841),  1  Hill  (N.  Y.),  234,  37 
Am.  Dec.  309;  Donnell  v.  Hai'she 
(1877),  67  Mo.  170;  Reynolds  v.  Pool 
(1881),  84  K  C.  37,  37  Am.  Rep.  607; 
Blue  v.  Leathers  (1853),  15  111.  32, 
Paige's  Partu.  Cas.  87  (farming  on 
shares);  Hagenbeck  v.  Arena  Co. 
(1893),  59  Fed.  Rep.  14;  Pulliam  v. 
Schimpf  (1893),  100  Ala.  362,  14  So. 
Rep.  488  (land-owner  who  furnishes 
site,  and  show  or  shooting-gallery 
proprietor  who  furnishes  means  of 
amusement,  and  divide  proceeds). 
1  See  Aigen  v.  Railroad  Co.  (1882). 
133  Mass.  423;  Irvin  v.  Railroad  Co. 
(1879),  93  III.  103,  34  Am.  Rep.  116. 


40 


WHAT   ACTS    CREATE    A    PARTXERSHIP.  [§  50. 

has  been  seen,  is  the  only  true  partnership, —  there  is  also 
necessarily  a  partnership  as  to  third  persons,  with  its  inci- 
dental rights  and  liabilities. 

It  is,  however,  entirely  settled  that  a  given  individual 
may  be  made  subject  to  the  liabilities  of  a  partner  when  in 
fact,  as  between  himself  and  the  persons  with  whom  he  was 
supposed  to  be  a  partner,  no  partnership  existed  or  was  in- 
tended. This  presumed  relation  is  sometimes  spoken  of  as 
a  partnership  as  to  third  persons  to  distinguish  it  from  the 
partnership  between  the  parties;  but  it  is  strictly  not  a  part- 
nership at  all,  for  it  does  not  follow  because  one  person  is 
held  liable  to  another  as  a  partner  that  the  same  conclusion 
involves  a  finding  that,  as  between  himself  and  his  alleged 
partners,  a  partnership  existed  with  its  consequent  rights 
and  obligations. 

Two  main  grounds  of  liability  as  a  partner  to  third  per- 
sons have  been  insisted  upon  and  require  consideration.  One 
was  that  of  sharing  profits,  and  the  other  that  of  holding 
oneself  out  as  a  partner. 

1.   Of  Sharing  Profits, 

§  56.  Sharing  profits  was  formerly  a  ground  of  liabil- 
ity to  third  persons  as  a  partner. —  It  was  laid  down  at  an 
early  period  in  England,  in  two  cases,  Grace  v.  Smith,^  and 
AVaugh  V.  Carver,-  Avhich  have  since  become  famous  in  the 
law  of  partnership,  that  aU  persons  who  shared  the  profits 
of  a  business  were  liable  as  partners  therein,  although  as 
between  themselves  no  partnership  existed  or  was  contem- 
plated. 

The  rule  and  the  reason  given  for  it  are  well  illustrated 
in  the  second  of  these  cases.  It  appeared  that  one  Carver 
and  his  son,  who  were  established  in  business  at  Gosport,  had 
entered  into  an  agreement  with  one  Giesler,  who  was  to  es- 
tablish himself  in  the  same  line  of  business  at  Cowes,  by 

'Grace  v.  Smith  (177.')),  2  Wni.  sWauffh  v.  Carver  (1793).  2  H. 
Blackstone,  998, --\  UK's"  Partn.  Cas.  Blackstone.  2:}~>.  2  Smith's  Lead. 
1,  Paige's  Partn.  Cas.  30.  Cas.  i:310,  Aiiu^'j"  Partn.  Ca&  0. 

41 


§  56.]  LAW    OF   PAETNEESHIP. 

which  the  concerns  were  to  co-operate  in  transacting  busi- 
ness. It  was  expressly  stipulated  that  neither  concern  was 
to  be  liable  for  the  losses  of  the  other,  and  that  each  was  to 
be  separate  and  distinct  from  the  other,  but  once  in  each 
year  the  parties  were  to  get  together  and  divide  in  certain 
proportions  the  proceeds  of  the  business  of  both  concerns. 
Giesler  incurred  indebtedness  in  his  own  name,  for  w^hich  it 
was  sought  to  make  the  Carvers  responsible  as  partners. 
Lord  Chief  Justice  Eyre,  who  delivered  the  opinion  of  the 
court,  admitted  that  it  was  "  plain  upon  the  construction  of 
the  agreement,  if  it  be  construed  only  between  the  Carvers 
and  Giesler,  that  they  were  not,  nor  even  meant  to  be,  part- 
ners." "  They  meant  each  house  to  carry  on  trade  without 
risk  of  each  other,  and  to  be  at  their  own  loss.  Though 
there  was  a  certain  degree  of  control  at  one  house,  it  was 
Avithout  an  idea  that  either  Avas  to  be  involved  in  the  conse- 
quences of  the  failure  of  the  other,  and  without  understand- 
ing themselves  responsible  for  any  circumstances  that  might 
happen  to  the  loss  of  either.  That  was  the  agreement  be- 
tween themselves.  But  the  question  is  Avhether  they  have 
not,  by  parts  of  their  agreement,  constituted  themselves  part- 
ners in  respect  to  other  persons.  The  case,  therefore,  is 
reduced  to  the  single  point,  whether  the  Carvers  did  not 
entitle  themselves  and  did  not  mean  to  take  a  moiety  of  the 
profits  of  Giesler's  house,  generally  and  indefinitely  as  they 
should  arise,  at  certain  times  agreed  upon  for  the  settlement 
of  their  accounts.  That  they  have  so  done  is  clear  u])on  the 
face  of  the  agreement ;  and  upon  the  authority  of  Grace  v. 
Smith,^  he  Avho  takes  a  moiety  of  all  the  profits  indefinitely 

1  In  Grace  v.   Smith,   the  facts  bar  it  was  dissolved  and  dvie  notice 

were  that  Grace  had  sued  Smith  was  given.     On  the  dissolution  it 

alone  as  a  secret  partner  with  one  was  agreed  that  all  the  stock  in 

Robinson,  for  goods  delivered  to  trade  and  debts  due  the  firm  should 

the  latter,  who  became  bankrupt  be  transferred  to  Robinson;  that 

in  1770.   It  appeared  that  on  March  Smith   was  to    have  back  £4,200 

30,  1767,  Smith  and  Robinson  had  which  he  brought  into  the  busi- 

formed    a  partnership    for  seven  ness,  and  £1,000  for  profits  up  to 

years,  but  in  the  following  Novem-  that  time;  that  Smith  was  to  per- 

42 


i 


"\\'HAT   ACTS   CREATE   A   PARTNERSHIP, 


[§57. 


shall,  by  operation  of  laAv,  be  made  liable  to  losses,  if  losses 
arise,  upon  the  principle  that,  by  taking  a  part  of  the  profits, 
he  takes  from  the  creditors  a  part  of  that  fund  which  is  the 
proper  security  to  them  for  the  payment  of  their  debts. 
That  was  the  foundation  of  the  decision  in  Grace  v.  Smith, 
and  I  think  it  stands  upon  the  fair  ground  of  reason."  The 
Carvers  were  therefore  held  liable. 

§  57.  Same  subject. —  It  does  not  seem  to  have  occurred 
to  the  court  that  the  profits  are  not  the  fund,  that  is,  the 
only  or  chief  fund  to  which  the  creditors  mav  resort,  be- 


mit  £4,000  to  remain  as  a  loan  to 
Robinson  for  seven  years  at  five 
per  cent,  and  an  annuity  of  £300 
per  annum,  for  all  which  Robinson 
gave  bond  to  Smith.  Smith  after- 
wards made  further  advances  until 
the  whole  indebtedness  amounted 
to' £7,000,  for  which  a  new  bond 
was  given.  The  plaintiff  contended 
that  this  arrangement  made  Smith 
a  secret  partner,  but  he  was  held 
not  to  be  so  liable.  Said  De  Grey, 
C.  J. :  "  The  only  question  is,  What 
constitutesa  secret  partner?  Every 
man  who  has  a  share  of  the  profits 
of  a  trade  ought  also  to  bear  his 
share  of  the  loss.  And  if  any  one 
takes  part  of  the  profit  he  takes  a 
part  of  that  fund  on  which  the 
creditor  of  the  trader  relies  for  his 
payment.  If  any  one  advances  or 
lends  money  to  a  trader  it  is  only 
lent  on  his  general  personal  secu- 
rity. It  is  no  specific  lien  upon  the 
profits  of  the  trade,  and  yet  the 
lender  is  generally  interested  in 
those  profits;  he  relies  on  them  for 
repayment.  And  there  is  no  dif- 
ference whether  that  money  be 
lent  de,  novo  or  left  beliind  in  traile 
by  one  of  the  partners  who  retires. 
And  whether  the  terms  of  tliat 


loan  be  kind  or  harsh  makes  also 
no  manner  of  difference.  I  think 
the  true  criterion  is  to  inquire 
whether  Smith  agreed  to  share  the 
profits  of  the  trade  with  Robinson, 
or  whether  he  only  relied  on  those 
profits  as  a  fund  of  payment;  a  dis- 
tinction not  more  nice  than  usually 
occurs  in  questions  of  trade  or 
usury.  The  jury  have  said  that  this 
is  not  payable  out  of  the  profits, 
and  I  think  there  is  no  foundation 
for  granting  a  new  trial."  Gould, 
J.,  of  same  opinion.  Blackstone,  J. : 
*'  Same  opinion.  I  think  the  true 
criterion  (when  money  is  advanced 
to  a  trader)  is  to  consider  whether 
the  profit  or  premium  is  certain  and 
defined,  or  casual,  indefinite,  and 
depending  on  the  accidents  of 
trade.  In  the  former  case  it  is  a 
loan  (whetlier  usurious  or  not  is 
not  material  to  the  present  ques- 
tion), in  the  latter  a  partnership. 
The  hazard  of  loss  and  profit  is  not 
equal  and  reciprocal,  if  tlie  lender 
can  receive  only  a  limited  sum  for 
the  profits  of  Jiis  loan,  and  yet  is 
made  liable  to  all  the  losses,  all  the 
debts  contracted  in  the  trade, to 
any  amount."  Nares,  J.,  of  same 
opinion. 


S  5S.]  LAW    OF   PARTNERSHIP. 

cause,  as  will  be  seen,  whether  there  are  profits  or  not,  the 
creditors  may  resort  to  all  of  the  assets  of  the  firm  for  pay- 
ment, as  well  as  to  the  individual  responsibility  of  the  part- 
ners. Neither  was  it  observed  that  the  very  statement  of 
the  rule  involved  an  inconsistency.  Profits  are  what  is  left 
after  the  creditors  are  paid  and  not  before;  and  therefore  to 
take  account  of  profits  as  such  while  the  creditors  yet  remain 
unpaid  was  an  inconsistency.  Neither  w^as  it  observed  that 
the  rule  often  resulted  in  compelling  one  creditor,  though 
for  a  small  amount,  to  stand  liable  as  a  partner  to  the  other 
creditors,  even  in  an  indefinite  amount.  Whatever  were 
the  inconsistencies,  however,  as  they  have  often  since  been 
pointed  out,  this  was  declared  to  be  the  rule,  and  it  remained 
the  rule  in  England  for  many  years,  and  was  adopted  from 
thence  into  the  United  States,  and  has  been  reiterated  and 
aifirmed  in  many  American  cases.^ 

Under  this  rule  it  mattered  little  what  was  the  name  or 
nature  of  the  ai'rangement  under  which  the  parties  were  re- 
lated, or  hoAvever  strongly  they  asserted  their  intention  not 
to  be  partners,  or  to  what  devices  they  had  recourse  to  avoid 
such  a  conclusion ;  if  they  shared  profits  as  profits,  as  the 
expression  was,  they  were  declared  to  be  partners  as  to  third 
persons  and  liable  as  such, 

§  58.  Of  the  case  of  Cox  v.  Hiclviiian.—  In  1860  a  case 
arose  in  the  English  courts  which  required  a  re-examination 
of  the  ground  of  liability  by  sharing  profits.  This  was  the 
case  of  Cox  v.  Hickman,-  decided  in  the  English  House  of 
Lords.  The  parties  sought  to  be  charged  as  partners  were 
not  partners  ioiter  sese  and  never  intended  to  be,  but  they 

I  See    Dob    v.   Halsey   (1819),  16  Medara  (1855),  3  Stockt.  Cli.  (N.  J.) 

Johns.  (N.  Y.)  34,  8  Am.  Dec.  293;  469,   64  Am.   Dec.   464;    Pratt    v. 

Bromley  v.  Elliot  (1859),  38  N.  H.  Langdon  (1867),  97  Mass.  97, 93  Am. 

287,   75  Am.   Dec.    182;    Miller-  v.  Dec.  61. 

Hughes  (1818),  1  A.  K.  Marsh.  (Ky.)  -'  Cox  v.  Hickman  (1860),  8  House 

181,10  Am.  Dec.  719;  Simpson  v.  of  Lords  Cases,  268,  Ames' Cases  on 

Feltz  (1826),  1  McCord  Ch.  (S.  C.)  Partn.  47. 
313,  16  Am.  Dec.  603;  Sheridan  v. 

44 


WHAT    ACTS    CREATE    A    PARTNERSHIP.  [§  59. 

were  entitled  to  share  in  tlie  net  income  of  a  business  as 
creditors  until  their  claims  were  paid. 

The  facts  were  that  the  firm  of  Smith  &  Son,  becominir 
financial!}"  embarrassed,  turned  their  property  over  to  trust- 
ees appointed  by  their  creditors.  The  trustees  were  to  carry 
on  the  business  under  the  name  of  "  The  Stanton  Iron  Com- 
pany," and  divide  the  net  income,  tc/dch  was  aJivays  to  he 
considered  the  property  of  Smith  cfc  Son^  among  the  creditors 
until  their  claims  were  paid,  and  then  the  property  was  to 
be  restored  to  Smith  &  Son.  Hickman  sold  goods  to  the 
trustees  in  the  name  adopted  by  them  for  the  business,  and 
drew  bills  on  them  which  were  accepted  in  that  name  by 
one  of  the  managing  trustees.  These  bills  not  being  paid, 
the  action  was  brought  to  charge  the  creditors  as  partners. 

It  was  urged  that  as  they  were  to  share  the  profits  they 
thereby  became  liable  as  partners,  and  many  of  the  judges 
were  of  this  opinion ;  but  the  Lords  united  in  repudiating  the 
old  and  arbitrary  rule,  and  placed  the  liability  upon  the 
ground  which  has  since  been  maintained  in  England  —  that 
of  mutual  agency. 

§  59.  Same  subject. —  In  the  leading  opinion  of  Lord 
Cranworth  it  was  said ;  "  It  was  argued  that  as  they  would 
be  interested  in  tlie  profits,  therefore  they  would  be  part: 
ners.  But  this  is  a  fallacy.  It  is  often  said  that  the  test,  or 
one  of  the  tests,  whether  a  person  not  ostensibly  a  partner 
is  nevertheless  in  contemplation  of  law  a  partner,  is  whether 
he  is  entitled  to  participate  in  the  profits.  This  no  doubt  is 
in  general  a  sufficiently  accurate  test;  for  a  right  to  partici- 
pate in  profits  affords  cogent,  often  conclusive,  evidence  that 
the  trade  in  which  the  profits  have  been  made  was  carried 
on  in  part  for  or  on  behalf  of  the  ])erson  setting  up  such  a 
claim.  But  the  real  ground  of  the  lialjility  is  tluit  the  trade 
had  been  carried  on  by  persons  acting  on  his  behalf.  When 
that  is  the  case,  he  is  liable  to  the  trade  obligations,  anil  en- 
titled to  its  profits,  or  to  a  share  of  them.  It  is  not  strictly 
correct  to  say  that  his  right  to  share  in  the  profits  makes 

45 


§§  60,  01.]  LAW    OF    PARTNERSHIP. 

him  liable  to  the  debts  of  the  trade.  The  correct  mode  of 
stating  the  proposition  is  to  say  that  the  same  thing  which 
entitles  him  to  the  one  makes  him  liable  to  the  other,  namely, 
the  fact  that  the  trade  has  been  carried  on  on  his  behalf,  i.  e., 
that  he  stood  in  the  relation  of  principal  towards  the  persons 
acting  ostensibly  as  the  traders,  Ijy  whom  the  liabilities  have 
been  incurred,  and  under  whose  management  the  profits 
have  been  made." 

§  60.  Same  subject. —  "  Taking  this  to  be  the  ground  of 
liability  as  a  partner,"  continued  Lord  Cranworth,  "  it  seems 
to  me  to  follow  that  the  mere  concurrence  of  creditors  in  an 
arrangement  under  which  they  permit  their  debtor,  or  trust- 
ees for  their  debtor,  to  continue  his  trade,  applying  the 
profits  in  discharge  of  their  demands,  does  not  make  them 
partners  with  their  debtor  or  the  trustees.  The  debtor  is 
still  the  person  solely  interested  in  the  profits,  save  only  that 
he  lias  mortgaged  them  to  his  creditors.  He  receives  the 
benefit  of  the  profits  as  they  accrue,  though  he  has  precluded 
himself  from  applying  them  to  any  other  purpose  than  the 
discharge  of  his  debts.  The  trade  is  not  carried  on  by  or 
on  account  of  the  creditors,  though  their  consent  is  neces- 
sary in  such  a  case,  for  without  it  all  the  property  might  be 
seized  by  them  in  execution.  But  the  trade  still  remains 
the  trade  of  the  debtor  or  his  trustees;  the  debtor  or  the 
trustees  are  the  persons  by  or  on  behalf  of  Avhom  it  is  car- 
ried on."    The  defendants  were  therefore  held  not  liable. 

§  61.  Effect  of  Cox  v.  Hickman  on  Englisli  law. —  In  a 

case  arising  not  long  afterwards  it  became  essential  to  de- 
termine, in  the  language  of  Blackburn,  J.,  "  what  really  was 
the  effect  of  the  decision  of  the  House  of  Lords  in  Cox  v. 
Hickman,"  and  he  said:  "  Prior  to  that  decision,  the  dictum, 
of  De  Grey,  C.  J.,  in  Grace  v.  Smith,  '  that  every  man  who 
has  a  share  of  the  profits  of  a  trade  ought  also  to  bear  a 
share  of  the  loss,'  had  been  adopted  as  the  ground  of  judg- 
ment in  Waugh  v.  Carver,  where  it  was  laid  down  '  that  he 
who  takes  a  moiety  of  all  profits  indefinitely  shall,  by  op- 

46 


WHAT   ACTS   CREATE   A   PARTNERSHIP.  [§  61. 

eratioii  of  law,  be  made  liable  to  losses  if  losses  arise,  upon 
the  jn-inciple  that,  by  taking  a  part  of  the  profits,  he  takes 
from  the  creditors  a  part  of  that  fund  which  is  the  proper 
security  to  them  for  the  paj^ment  of  their  debts.'  This  de- 
cision has  never  been  overruled.  The  reasoning  on  which  it 
proceeds  seems  to  have  been  generally  acquiesced  in  at  the 
time;  and  when,  more  recently,  it  was  disputed,  it  was  a 
common  opinion  (in  which  I  for  one  participated)  that  the 
doctrine  had  become  so  inveterately  part  of  the  law  of  Eng- 
land that  it  would  require  legislation  to  reverse  it.  In  Cox 
V.  Hickman  the  creditors  of  a  trade  had  agreed  that  their 
debtor's  trade  should  be  carried  on  for  the  ]nirpose  of  pay- 
ing them  their  debts  out  of  the  profits,  and  the  composition 
deed  to  which  they  were  parties  secured  to  them  a  property 
in  the  profits.  The  rule  laid  down  in  Waugh  v.  Carver,  if 
logically  followed  out,  led  to  the  conclusion  that  all  the 
creditors  Avho  assented  to  this  deed,  and  by  so  doing  agreed 
to  take  the  profits,  were  individually  liable  as  partners ;  but 
when  it  was  sought  to  apply  the  rule  to  such  an  extreme 
case,  it  was  questioned  whether  the  rule  itself  was  really 
established.  There  was  a  very  great  difference  of  opinion 
amongst  the  judges  who  decided  the  case  in  its  various  stages 
below,  and  also  amongst  those  consulted  in  the  House  of 
Lords.  In  the  result,  the  House  of  Lords  —  consisting  of  Lord 
Campbell,  C,  and  Lords  Brougham,  Cranworth,  Wensleydale 
and  Chelmsford  —  unanimously  decided  that  the  creditors 
were  not  partners.  The  judgments  of  Lord  Cranworth  and 
of  Lord  Wensleydale  bear  internal  evidence  of  having  been 
written.  Lord  Campbell,  C,  and  Lords  Brougham  and 
Chelmsford  said  a  few  words  expressing  their  concurrence. 
It  is  therefore  in  the  written  judgments,  and  more  especially 
in  the  elaborate  judgment  of  Lord  Cranworth,  that  Ave  must 
look  for  the  ratio  decidendi.     .     .     . 

"  I  think  that  the  ratio  decidendi  is,  that  the  proposition 
laid  down  in  Waugh  v.  Carver  —  viz.,  that  a  participation 
in  the  profits  of  a  business  does  of  itself,  by  oi)eration  of 
law,  constitute  a  partnership  —  is  not  a  correct  statement 

4? 


§§  62,  63.]  LAW   OF   PAKTNERSniP. 

of  the  law  of  England ;  but  that  the  true  question  is,  as  stated 
by  Lord  Cranworth,  whether  the  trade  is  carried  on  on  be- 
half of  the  person  sought  to  be  charged  as  a  partner,  the 
participation  in  the  profits  being  a  most  important  element 
in  determining  that  question,  but  not  being  in  itself  decisive; 
the  test  being,  in  the  language  of  Lord  Wensleydale,  whether 
it  is  such  a  participation  of  profits  as  to  constitute  the  rela- 
tion of  principal  and  agent  between  the  person  taking  the 
prollts  and  those  actually  carrying  on  the  business."* 

§  62.  Effect  of  Cox  v,  Hickiiiaii  in  the  United  States.— 

In  the  United  States  the  case  of  Cox  v.  Hickman  has  been 
quite  generally  followed.  In  many  of  the  states  earlier  de- 
cisions following  the  old  English  cases  have  been  overruled, 
though  in  others,  and  notably  in  New  York^  and  Pennsyl- 
vania,^ the  courts  have  held  the  former  rule  to  be  too  deeply 
rooted  in  their  jurisprudence  to  be  overthrown,  except  by 
legislative  action. 

§63.  Same  subject  —  Beecher  t.  Bush.  — In  a  case  in 
Michigan"*  in  which  the  question  arose,  the  court,  speaking 
through  Mr.  Justice  Cooley,  after  reviewing  many  of  the  de- 

1  Bullen  V.  Sharp  (1865),  L.  R.  1  *  Beecher  v.  Bush  (1881),  45  Mich. 
Com.  PI.  86,  Ames'  Cas.  on  Partn.  188,  40  Am.  Rep.  465,  Paige's  Partn. 
67.  See,  also,  MoUwo  v.  Courts  of  Cas.  46.  In  this  case  it  appeared 
Wards  (1872),  L.  R  4  Pr.  Coun.  App.  that  Beecher  owned  a  hotel.  One 
419,  Ames'  Cases  on  Partn.  79;  Williams  i^roposed  to  "hire  the 
Pooley  V.  Driver  (1876),  5  Ch.  Div.  use  "  of  it  and  pay  Beecher  there- 
458,  Ames'  Cases  on  Partn.  87.  See,  for,  from  day  to  day,  a  sum  "  equal 
also,  now  the  Partnership  Act,  §  2,  to  one-third  of  the  gross  receipts 
Appendix,  2^ost  and  gross  earnings."    Beecher  ac- 

2  See  Leggett  v.  Hyde  (1874),  58  cepted  and  the  arrangement  went 
N.  Y.  272,  17  Am.  Rep.  244;  Hack-  into  effect.  Williams  bought  goods 
ett  V.  Stanley  (1889),  115  N.  Y.  625.  of  Bush  which  he  did  not  pay  for, 

8  See  Wessels  v.  Weiss  (1895),  166  and  this  action  was  to  hold  Beecher 

Pa,  St.  490,  31  Atl.  Rep.  247.     In  liable  for  them  as  a  partner  with 

North  Carolina,  see  Southern  Fer-  Williams  by  force  of  the  arrange- 

tilizer  Co.  v.  Reams  (1890),  105  N.  ment    Held,  not  liable. 
C.  883;  Cossack  v.  Burgwyn  (1893), 
112  N,  G  304,  16  S.  K  Rep.  900. 


WHAT    ACTS   CREATE   A    PARTNERSHIP.  [§  64. 

cisions  both  prior  and  subsequent  to  Cox  v.  Hickman,  says: 
"'  It  is  needless  to  cite  other  cases.  They  cannot  all  be  rec- 
onciled, but  enough  are  cited  to  show  that,  in  so  far  as  the 
notion  ever  took  hold  of  the  judicial  mind  that  the  question 
of  partnership  or  no  partnership  was  to  be  settled  by  arbi- 
trary tests,  it  was  erroneous  and  mischievous,  and  tiie  ])roper 
corrective  has  been  applied.  Except  when  one  allows  the 
public  or  individual  dealers  to  be  deceived  by  the  appear- 
ances of  partnership  where  none  exists,  he  is  never  to  be 
charged  as  a  partner,  unless  by  contract  and  with  intent  he 
has  formed  a  relation  in  which  the  elements  of  partnership 
are  to  be  found.  And  what  are  these?  At  the  very  least 
the  following:  Community  of  interest  in  some  lawful  com- 
merce or  business,  for  the  conduct  of  which  the  parties  are 
mutually  princi])als  of  and  agents  for  each  other,  with  gen- 
eral powers  within  the  scope  of  the  business,  which  powers, 
however,  by  agreement  between  the  parties  themselves,  may 
be  restricted  at  option,  to  the  extent  even  of  making  one 
the  sole  agent  of  the  others  and  of  the  business." 

§  64.  Same  subject  —  Harvey  v.  Childs.  —  In  another 
case ^  upon  the  subject  which  arose  in  Ohio  it  is  said:  "  What 
shall  be  regarded,  as  to  third  persons,  as  a  test  of  partnership 
between  parties  who  did  not  consider  themselves  to  be  part- 

1  Harvey  v.  Chikls  (1876),  38  Ohio  of  Childs,  Potter  bought  on  his  own 

St.  319,  22  Am.  Rep.  387.     In  this  credit  a  lot  of  hogs  of  Harvey,  the 

case  one  Potter  was  buying  hogs  plaintiff,  but  did  not  pay  for  them, 

for  shipment.     He  had  not  money  These  hogs  forined  part  of  the  lot 

enough,  and  tried  to  get  Childs  to  which    Childs   sold  in   pui-suance 

supply  it  and  take  an  interest  in  of  his  arrangement  with    Potter, 

the  venture,  but  Childs  refused.    It  There  were  no  profits,  but  a  loss, 

was  then  agreed  that  Childs  should  and  Potter  made  it  good  to  Childs. 

let  Potter  have  money  to  complete  Potter  did  not  pay  Harvey,   and 

his   purchases,  and  Childs  was  to  Harvey  sued  Cliilds  to  liold  him 

take  possession  of  the  hogs  as  se-  liable  as  a  partner  with  Potter  in 

curity,  sell  them,  reimburse  him-  the  purchase.     Held,  that  he  was 

self    and    have    half    of   the    net  not    liable.    St'e,  also,  Clifton    v. 

profits;  but  that  in  any  event  Pot-  Howard  (188(3;,  8a  Mo.  VJ2,  58  Am. 

ter  should  pay  back  all  of  Childs'  Rep.  97. 
advances.    Without  the  knowledge 
4                                              49 


§  65.]  LAW    OF    PAETNEKSIIIP. 

ners  and  who  have  done  nothing  to  estop  tbem  from  deny- 
ing that  they  are  such,  has  been  much  discussed  by  courts 
and  elementary  writers,  and  the  problem  seems  to  be  one 
of  difficult  solution.  It  is  needless  to  review  here  the  nu- 
merous cases  on  the  subject;  a  statement  of  results  is  suffi- 
cient. 

"  Ko  little  difficulty  has  been  experienced  in  determining 
the  meaning  and  limits  of  phrases  that  have  been  recognized 
as  tests  of  a  partnership  in  such  cases,  and  in  their  applica- 
tion to  the  varj^ing  cases  that  arise.  The  effort  has  been  to 
draw  a  distinct  line  between  cases  where  one  has  a  com- 
munity of  interest  in  the  profits  of  a  business,  as  distin- 
guished from  those  where  one  is  entitled  to  receive  a  sum 
of  money  out  of  the  profits  as  a  creditor,  or  a  sum  propor- 
tioned to  a  quantum  of  profits,  or  a  share  of  the  profits  as 
a  compensation  for  services  or  labor. 

"  Although  a  partnership  may  be  said  to  rest  upon  the 
idea  of  a  communion  of  profits,  nevertheless  the  foundation 
of  the  liability  of  one  partner  for  the  acts  of  another  is  the 
relation  they  sustain  to  each  other,  as  being  each  principal 
and  agent.  That  relation,  it  w^ould  seem,  then,  constitutes 
the  true  test  of  a  partnership  liability,  and  rests  upon  the 
just  foundation  that  the  joint  liability  was  incurred  on  the 
express  or  implied  authority  of  the  party  sought  to  be 
charged." 

§65.  Same  subject. —  "But  if  the  relation  of  principal 
and  agent  be  regarded  as  the  test  of  a  partnership  and  con- 
sequent joint  liability,"  continued  the  court,  "  the  question 
still  remains:  What  shall  be  deemed  sufficient  evidence  of 
that  relation,  or  to  raise  the  implication  of  authority  to 
incur  the  liability  in  question?  To  this  end  numerous  tests 
have  been  supposed  to  exist;  but  the  best  considered  and 
least  objectionable  is  that  of  a  community  of  interest  in  the 
profits  of  a  business  or  transaction  as  a  principal  or  pro- 
prietor. But  this  test  is  valuable  as  a  rule  chiefly  because 
it  evinces  a  relation  between  the  parties,  where  each  may 

50 


WHAT    ACTS    CKEATE    A   PARTNEKSHIP.  [§  GG. 

reasonably  be  presumed  to  act  for  himself  and  as  agent  for 
the  others,  and  to  that  extent  establishes  the  fact  that  the 
liability  was  incurred  on  the  authority  of  all  so  participating 
in  the  profits.  Participation  in  the  profits  of  a  business, 
however,  cannot  be  regarded  as  a  rule  so  universal  and  un- 
relenting as  to  be  unjustly  applied  to  a  case  where  a  debt  is 
incurred  by  one  who  cannot  be  said  to  be  acting,  in  the  par- 
ticular transaction,  as  the  agent  or  on  behalf  of  the  party 
sought  to  be  charged.  Therefore,  on  principle,  the  true  test 
of  a  partnership,  at  last,  is  left  to  be  that  of  the  relation  of 
the  parties  as  principal  and  agent,  to  be  proved  by  any  com- 
petent evidence;  for  where  they  sustained  that  relation,  a 
joint  liability  may  be  said  to  have  been  incurred  by  the  au- 
thority or  on  behalf  of  each  of  the  parties  so  related.  The 
tendencv  of  the  more  modern  authorities,  both  Encrlish  and 
American,  is  to  this  conclusion." 

§  66.  Same  subject  —  Meeliaii  v.  Valentine. —  The  test 
of  mutual  agency  has  not,  however,  proven  entirely  satis- 
factory to  all  of  the  courts.  It  is  said,  and  not  without  rea- 
son, that  this  is  to  invert  the  logical  order  of  events  and 
turn  the  result  into  the  cause  —  that  mutual  agency  is  the 
result  of  partnership  rather  than  that  partnership  is  the  re- 
sult of  mutual  agency.  Thus  it  is  said  in  a  recent  case  ^  in 
the  supreme  court  of  the  United  States:  "As  has  been 
pointed  out  in  later  English  cases,  the  reference  to  agency 

1  Meehan  v.  Valentine  (1891),  145  determine  the  exact  profit,  it  was 

U.   S.   611.      This  was    an   action  agreed  that  he  should  liave  $1,000 

brought  to  charge  the  estate  of  one  each  year  on  account,  leaving  the 

P.,  deceased,  of  whicli  V,  was  ex-  exact  amount  to  be  determined  on 

ecutor,  on  the  ground  that  P.  was  the  final  settlement  of  the  whole 

a  partner  in  the  firm  of  C.  &  Co.  business.     Tliis  arrangement  was 

P.  loaned  C.  &  Co.  $10,000  on  the  continued  for  four  years,  when  C. 

agreement  that  he  was  to  have,  in  &  Co.  failed,  owing  large  amounts 

addition  to  the  interest,  one-tenth  to  tlie  plaintilF  and  others.     The 

of  the  net  profits  over  a  given  sum.  court  held  tliat  this  was  a  loan; 

P.  received,  under  this  agreement,  that  P.  was  a  crcMlitor  and  not  a 

about  $1,500  the   first  year;    but  partner,  and  consetiuently  that  the 

afterwards,  as  it  was  difficult  to  action  could  not  be  maintained. 

51 


§§  67,  CiS.]  LAW    OF    PARTNEESHIP, 

as  a  test  of  partnership  was  unfortunate  and  inconclusive, 
inasmuch  as  agency  results  from  partnership  rather  than 
partnership  from  agency.  Such  a  test  seems  to  give  a 
synonym  rather  than  a  definition ;  another  name  for  the 
conclusion  rather  than  a  statement  of  the  premises  from 
which  the  conclusion  is  to  be  drawn.  To  say  that  a  person 
is  liable  as  a  partner,  who  stands  in  the  relation  of  principal 
to  those  by  whom  the  business  is  actually  carried  on,  adds 
nothing  by  way  of  precision,  for  the  very  idea  of  partner- 
ship includes  the  relation  of  principal  and  agent." 

§  67.  Same  subject.  —  In  this  case  the  court  further  say : 
"  In  the  present  state  of  the  law  upon  this  subject,  it  maj^ 
perhaps  be  doubted  whether  any  more  precise  general  rule 
can  be  laid  down  than  that  those  persons  are  partners  who 
contribute  either  property  or  money  to  carry  on  a  joint 
business  for  their  common  Ijenefit,  and  who  own  and  share 
the  profits  thereof  in  certain  proportions.  If  they  do  this, 
the  incidents  or  consequences  follow,  that  the  acts  of  one  in 
conducting  the  partnership  business  are  the  acts  of  all;  that 
each  is  agent  for  the  firm  and  for  the  other  partners ;  that 
each  receives  part  of  the  profits  as  profits,  and  takes  part  of 
the  fund  to  which  the  creditors  of  the  partnership  have  a 
right  to  look  for  the  payment  of  their  debts;  that  all  are 
liable  as  partners  upon  contracts  made  by  any  of  them 
within  the  scope  of  the  partnership  business ;  and  that  even 
an  express  stipulation  between  them  that  one  shall  not  be 
so  liable,  though  good  between  themselves,  is  ineffectual  as 
against  third  persons.  And  participating  in  profits  is  pre- 
sumptive, but  not  conclusive,  evidence  of  partnership." 

§  68.  Same  subject. —  jSTotwithstanding  these  differences 
of  opinion  as  to  the  test  of  mutual  agency,  it  is  entirely  clear 
that  the  old  rule  that  sharing  profits  as  profits  made  one  a 
partner  is  overthrown.  It  seems  also  to  be  true  that  the  real 
test  is  that  suggested  by  the  definition  given  in  the  first  sec- 
tion, namely,  that  there  must  be  a  community  of  interest  — 
a  joining  as  principals,  in  carrying  on  a  business  for  their 

53 


AVHAT   ACTS    CREATE   A   PARTNERSHIP.  [§  69. 

joint  profit.  This  community  of  interest  as  principals  in  tlu- 
transaction  necessarily  excludes  mere  servants  or  agents 
who  are  to  share  profits  by  way  of  contingent  comi)ensa- 
tion;  lenders  who  are  to  share  in  the  profits  by  Avay  of  con- 
tingent interest ;  landlords  who  are  to  take  a  share  of  the 
profits  by-way  of  rent;  and  any  other  class  of  creditors 
whose  interest  is  not  in  the  business  itself,  who  have  no  com- 
mon ownership  of  the  business,  its  capital  or  its  stock  in 
trade,  who  do  not  oicn  the  profits,  if  there  are  any,  Avho 
have  no  ^'oice  or  part  in  controlling  the  management  of  the 
business,  but  who  are  simply  entitled  to  be  paid  out  of  the 
profits,  if  there  are  any,  some  claim  or  demand  which  thev 
have  against  the  real  principals  in  the  business.^ 

It  is  apparent  that  the  subdivision  now  under  consider- 
ation is  not  properly  to  be  deemed  a  ground  for  the  creation 
of  a  ^wa5^-partnersh]p.  It  remains,  therefore,  to  consider 
the  other,  already  mentioned,  namely  — 

2.   Of  Holding  Out  as  a  Partner. 

§  69.  Person  may  become  liable  as  a  partner  by  hold- 
ing himself  ont  as  one.—  A  |)erson  who  is  not  actually  a 
partner  may  render  himself  liable  as  though  he  were  one  by 
so  conducting  himself  as  to  reasonably  induce  third  persons 
to  believe  that  ho  is  a  partner  and  to  act  upon  that  belief. 
This  rule  is  based  upon  the  same  principle  as  that  which  has 
been  discovered  in  the  law  of  Agency, —  that  a  person  may 
become  liable  for  the  acts  of  another  who  was  not  really 
his  agent,  if  he  has  so  conducted  himself  as  to  lead  others 
to  believe  that  such  person  was  his  agent.  It  is  a  case  in 
which  the  principle  of  estoppel  a])])lies.  Estoppel  is  tliat 
which  stops,  bars,  or  prevents.     ]\Iore  spccilically,  for  our 

'See,  also,  Parclicn  v.  Antloison  j^oner  v.  First  Nat.  Hank  (isiil),  |:{ 

(1885),  5  Mont.  488,  51  Am.  Rep.  (i5;  Neb.  84,  Gl  N.  W.  Kep.  112;   Boston 

Vinson  v.  Beveridge.  8  MacArtli.  Smelting  Co.  v.   Smith   (18S()),   i;j 

(D.  C.)  597,  36  Am.  Rep.   113;  So-  R.  I.  37,  43  Am.  Rep.  3;  Culley  v. 

diker  v.   Applegate   (1884),  24  W.  Edwards    (1H84),   44  Ark.   4'J3,    51 

Va.   411,   49  Am.    Kep.   252;  Wag-  Am.  Rep.  (51 1. 


§  70.]  LAW    OF    PARTNERSHIP. 

purposes,  it  is  that  priiiciple  of  the  law  which  operates  to 
prevent  a  man,  who  has  knowingly  led  another  reasonably 
and  in  good  faith  to  rely  upon  the  existence  of  a  certain 
condition  of  things,  from  afterwards  denying,  to  the  preju- 
dice of  such  other,  that  such  a  condition  of  things  did  exist. 
In  the  law  of  partnership  it  is  commonly  spoken  of  as  a 
liability  incurred  by  holding  oneself  out  as  a  partner. 

§  10.  Same  subject  —  What  facts  must  exist?  —  In  order 

to  the  existence  of  this  liability,  two  main  facts  must  exist: 

I     1.  The  condition  or  thing  relied  upon  as  evidence  of  the 

'holding  out  must  have  been  caused  either  by  the  party  to. 

i  1^  charged  as  partner,  in  person,  or  by  another  with  his 

knowledge  and  consent;  and 

2.  The  party  seeking  to  hold  him  liable  as  a  partner  must, 
in  the  exercise  of  reasonable  prudence  and  good  faith,  have 
I  relied  upon  such  condition  or  thing  and  been  misled  by  it.^ 

The  condition  or  thing  relied  upon  maybe  an  act  or  a 
representation  or  a  mere  failure  to  act.  ISTo  particular  form 
or  ceremony  is  necessary.  The  appearance  or  condition  re- 
lied upon  need  not  have  been  caused  by  the  party  in  person, 
but  may  have  been  caused  by  others  with  his  knowledge 

1  In  Liudley  on  Partnership  (vol.  cannot  be  imputed  to  the  person 

1,  p.  43)  it  is  said :     "It  follows  .    .  sought  to  be  made  liable ;  and  in  the 

that  a  person  cannot  be  liable  on  a  absence  of -the  second,  the  person 

contract,  on  the   ground  that   he  seeking  to  make  liim  liable  has  not 

held  himself  out  as  a  partner,  un-  in  anyway  been  misled."    See.  also, 

less  he  did  so  before  the  contract  Hahlo  v.  Mayer  (1890),  102  Mo.  9-3, 

was  entered  into.     It  also  follows  33   Am.  St.  Rep.  753;  Fletcher  v. 

that  no  person  can  be  fixed  with  Pullen  (1889),  70  Md.  205,  14  Am. 

liability  on  the  ground  that  he  has  St.  Rep.  355 ;  Morgan  v.  Farrel  (1890), 

been  held  out  as  a  partner,  unless  58  Conn.  413,  18  Am.  St.  Rep.  282; 

two  things  concur,  viz.:  first,  the  al-  Van  Kleeck  v.  Hammell  (1891),  87 

leged  act  of  holding  out  must  have  Mich.   599,   24  Am.    St.   Rep.   183; 

been  done  either  by  him  or  by  his  Thompson  v.  First  National  Bank 

consent,  and  secondly,  it  must  have  (1883),  111  U.  S.  529;  Lincoln  v.  Craig 

been  known  to  the  person  seeking  (1889),  10  R.  I.  564, 18  Atl.  Rep.  175; 

to  avail  himself  of  it.     In  the  ab-  Cornhauser  v.   Roberts    (1890),   75 

sence  of  the  first  of  these  requi-  Wis.  554,  44  N.  W.  Rep.  744. 
sites,  whatever  may  have  been  done 

54 


I 


■WHAT    ACTS   CREATE   A   PARTNERSHIP. 


[§'^1. 


and  consent.  It  may  consist  in  a  mere  omission  to  do  what 
a  reasonable  man  should  do,  under  the  circumstances,  to 
prevent  third  persons  from  being  misled  by  a  false  appear- 
ance of  things  of  which  he  had  notice.^ 

§  71.  Same  subject  — AVho  may  enforce  liability.—  It  is 

not  necessary  that  the  condition  or  appearance  shall  have 
been  known  to  persons  generally;  it  is  enough,  but  also  es- 
sential, that  it  was  known  to  the  party  deceived  by  it.-  But 
the  party  seeking  to  enforce  the  liability  must  have  exer- 
cised reasonable  prudence,  must  have  acted  in  good  faith, 
and  must  have  been  actually  deceived  by  the  condition  or 
appearance.  If  he  knew,  or  might  have  known,  the  true 
state  of  facts,  or  if  he  did  not  rely  upon  the  appearance  or 
condition,  he  has  no  cause  of  complaint.^ 

assert  and  manifest  his  refusal, 
and  thereby  prevent  innocent  par- 
ties from  being  misled.'  Parsons 
on  Partnership,  134." 

2Clearlj'  the  party  cannot  be 
held  liable  as  aTpartner  by  estoppel 
except  to  those  who  knew  of  the 
holding  out  and  relied  upon  it. 
Webster  v.  Clark  (1894),  34  Fla.  G37, 
16  So.  Rep.  601,  43  Am.  St.  Rep.  217. 
27  L.  R.  A.  126;  Dubos  v.  Jones 
(1894),  34  Fla.  539,  16  So.  Rep.  392: 
Knard  v.  Hill  (1893),  102  Ala.  570, 
15  So.  Rep.  345. 

3  In  Morgan  v.  Parrel,  siqnrt,  the 
court  held  that  the  party  seeking 
to  enforce  the  liability  must  show- 
that  he  exercised  good  faith  and 
due  diligence  to  know  the  truth: 
and  that  if  sucii  circumstances  arc 
brought  to  his  notice  as  would  be 
certain  to  excite  in(iuiry  in  the 
mind  of  any  prudent  man,  and  tlic 
means  of  ascertiiiniiig  the  truth 
were  readily  accessible  but  not 
used,  the  party  could  not  recover. 


1  Thus  in  Fletcher  v.  Pull  en,  swpra, 
there  was  evidence  that  the  defend- 
ant, to  his  knowledge,  had  been  ad- 
vertised in  the  newspapers  as  a 
partner  with  another  person.  Said 
the  court:  '•  Having  knowledge  of 
these  advertisements,  it  was  his 
duty  to  deny  the  partnership  if  he 
wished  to  escape  liability.  But 
what  was  he  to  do  and  how  much? 
We  do  not  say  that  he  was  under  a 
legal  obligation  to  publish  a  repu- 
diation of  the  partnership  in  the 
same  newspapers,  or  in  any  other, 
though  this  would  seem  to  be  a 
very  obvious  and  the  most  efficient 
mode  of  proclaiming  such  denial, 
and  the  fact  that  he  failed  to  do  so 
was  a  circumstance  to  go  to  the 
jury.  But  we  take  it  that  the  rule 
upon  this  subject  stated  by  a  very 
eminent  jurist  is  reasonable  and 
just:  '  If  one  is  held  out  as  a  part- 
ner, and  he  knows  it.  he  is  charge- 
able as  one,  unless  he  does  all  that  a 
reasonable  and  lioncst  man  should 
do,  under  siujilar  circumstances,  to 


§§  72,  73.]  LAW    OF    PARTNERSHIP. 

In  a  recent  case '  it  is  said :  "  The  law  on  this  subject,  well 
established  by  authority,  maybe  stated  thus:  The  ground 
of  liability  of  a  person  as  partner  who  is  not  so  in  fact  is 
that  he  has  held  himself  out  to  the  world  as  such,  or  has 
permitted  others  to  do  so,  and  by  reason  thereof  is  estopped 
from  denying  that  he  is  one  as  against  those  who  have  in 
cood  faith  dealt  with  the  firm  or  with  him  as  a  member  of 
it.  But  it  must  appear  that  the  person  dealing  with  the 
firm  believed,  and  had  a  reasonable  right  to  believe,  that  the, 
party  he  seeks  to  hold  as  a  partner  was  a  member  of  th.e_ 
firm,  and  that  the  credit  was,  to  some  extent,  induced  by^ 
this  belief.  It  must  also  appear  that  the  holding  out  was 
by  the  party  sought  to  be  charged,  or  by  his  authorit}^,  or 
with  his  knowledge  or  assent.  This,  where  it  is  not  the  di- 
rect act  of  the  party,  may  be  inferred  from  circumstances, 
such  as  advertisements,  shop  bills,  signs  or  cards,  and  from 
various  other  acts  from  which  it  is  reasonable  to  infer  that 
the  holding  out  was  with  his  authority,  knowledge  or  as- 
sent." 

§72.  Same  subject  —  Evidence  admissible. —  The  bur- 
den of  proving  the  liability  as  a  partner  is  upon  him  who 
asserts  it.  This  proof  may  be  made  by  any  kind  of  evi- 
dence having  a  legitimate  tendency  to  that  end.  Thus  it 
may  be  established  not  only  by  direct  evidence,  but  by  the 
admissions,  acts  or  declarations  of  the  party  sought  to  be 
charged.  It  cannot,  however,  be  established  by  showing  a 
general  reputation  that  the  jmrty  was  a  partner. 

Whether  the  party  charged  has  held  himself  out  as  a  part- 
ner, or  has  permitted  it  to  be  done,  is  a  question  of  fact  for 
the  jury.- 

§  73.  Same  subject  —  The  effect. —  A  person  may  thus 
become  liable  as  though  he  were  a  partner  by  "  holding  out," 
either  in  contract  or  in  tort ;  but  he  is  not  thereby  made  a 

1  Fletcher  V.  Pullen,  sifpra.  355;  Seabury  v.  Crowell  (1890),  51 

2  Fletcher  v.  PuUen  (1889),  70  Md.  N.  J.  L.  103,  53  id.  413.  16  Atl.  Rep. 
205, 16  Atl.  Rep.  887, 14  Am.  St.  Rep.     84,  11  L.  R.  A.  186. 

56 


WHAT    ACTS    CREATE   A    PARTNERSHIP.  [§  73. 

partner  as  to  other  persons  than  those  relj'ing  upon  the  con- 
dition or  appearance  for  which  he  is  thus  held  responsible, 
nor  does  he  acquire  the  rights  or  obligations  of  a  partner  as 
between  himself  and  his  alleged  copartners. 

Whether  he  is  to  be  held  liable  alone  or  in  connection 
with  his  reputed  partner  must  depend  upon  the  acts  of  both. 
If  the  person  with  whom  he  was  held  out  as  a  partner  was 
ignorant  of  it  and  did  not  concur  in  it,  he  could  not  be  held 
liable.  If,  on  the  other  hand,  he  concurred  or  co-operated 
in  the  holding  out  of  the  other,  both  may  be  held  liable. 

It  must  also  be  borne  in  mind  that  though  a  partnership 

actually  exists  with  certain  bounds  or  limits,  one  or  more 

partners  may  become  liable  to  third  persons  be3'ond  those 

bounds  or  limits,  if  they  hold  themselves  out  as  partners  in 

a  more  enlarged  capacity  than  that  fixed  as  between  the 

partners  themselves. 

57 


CHAFTEE  YI. 


OF  SOME  INCIDENTS  OF  PARTNERSHIP. 


§  74.  In  general. 
I.  Of  Articles  of  Partneuship. 

75.  Of  the  necessity  of  articles. 

76.  Of  the  scope  of  the  articles. 

77.  Of  the  construction  of  arti- 

cles. 

78.  Of  waiving  or  enlarging  by 

conduct. 

79.  or  continuing  under  former 

articles. 

80.  Of  the  usual  clauses  in  arti- 

cles. 

81.  Of  enforcing  the  provisions. 

II.  Of  the  Firm  Name. 

83.  Of  the  necessity  of  a  firm 
name. 

83.  What  name  maybe  adopted. 

84.  What  may  be  done  in  the 

firm  name. 

85.  Of  the  firm  name  as  prop- 

erty. 

86.  Of  the    right  to   the    firm 

name  upon  dissolution. 

III.  Of  the  Good-will. 

87.  What  is  meant  by  good-will. 

88.  Good-will  as  an  asset. 

89.  Disposition      of      good-will 

upon  dissolution. 

IV.  Of  the  Capital  of  the  Firm. 

90.  What  constitutes  capital. 

91.  Fixing  amounts  and  inter- 

ests in. 
93.  Wliat   may  be  received  as 
contribution. 


V.  Of  the  Property  of  the  Firm. 
1.  Of  Firm  Property  in  General. 
§  93.  What   may  be  partnership 
proi^erty. 

94.  What    constitutes  partner- 

ship property. 

95.  Property  bovight  by  one 

partner  in  his  own  name. 

96.  Property   used  by  the 

firm. 

97.  Nature  of  each  partner's  in- 

terest. 

98.  Extent  of  each  partner's  in- 

terest. 

99.  Transfer  of  shares. 

100.  Seizure  of  partner's  share  by 

his  creditor. 

2.  Of  the  Title  to  Personal  Property. 

101.  May  be  held  in  firm  name. 
103.  May  be  held  in  name  of  one 

partner  for  the  firm. 

103.  Title  is  in  firm  collectively. 

3.  Of  the  Title  to  Real  Estate. 

104.  Legal  title  cannot  be  taken 

in  firm  name. 

105.  Equitable  title  is  in  the  firm. 

106.  107.  When  land  is  partner- 

ship property. 

108.  Nature  of  partner's  interest 

in  firm  realty. 

109.  Partnership     realty,    when 

deemed  personal  estate. 

110.  Bona  fide   purchaser  from 

partner  having  legal  title. 

111.  Interest  of  surviving  part- 

ner in  firm  realty. 


58 


SOME    INCIDENTS   OF    PARTNERSHIP.  [§§  T4-TG. 

§  74.  In  general. —  A  partnership  having  been  formed,  a 
number  of  subjects  incident  to  its  existence  become  impor- 
tant, and  though  they  may  not  all  be  similar  in  their  char- 
acter they  may  aj^propriately  be  grouped  together  in  one 
chapter  for  consideration. 

I.    Of  Articles  or  Partnership. 

§  75.  Of  the  necessity  of  articles. —  As  has  been  stated, 
it  is  desirable,  but  not  usually  indispensable,  to  have  writ- 
ten evidence  of  the  agreement  between  the  parties  as  to  the 
creation,  continuance,  terms  and  conditions  of  their  partner- 
ship. The  formal  written  instruments  prepared  in  such  cases 
are  spoken  of  as  the  partnership  articles.  As  between  them- 
selves, it  is,  in  general,  possible  for  the  parties  to  fix  their 
rights,  duties  and  liabilities,  as  well  as  the  circumstances  of 
the  commencement,  continuance  and  termination  of  the  part- 
nership, by  their  agreement;  and  though,  in  the  absence  of 
such  an  agreement,  the  law  will  usually  determine  these  mat- 
ters for  them,  it  is  not  by  any  means  certain  that  the  legal 
conclusions  will  be  the  same  that  the  parties  contemplated, 
and  it  is  in  any  event  desirable  that  the  opportunity  for  con- 
troversy be  removed  by  express  stipulation. 

§  76.  Of  the  scope  of  articles. —  It  is  not,  however,  usu- 
ally feasible,  by  even  the  most  carefully-drawn  articles,  to 
provide  Ijeforehand  for  every  possible  contingency,  or  to  de- 
fine all  the  rights,  duties  or  liabilities  of  the  partners.  IMucIi 
must  of  necessity  be  understood ;  custom  or  usage  may  be 
tacitly  recognized;  and  conduct  or  practice  may  add  to  or 
modify  tliat  which  is  expressed.  It  may  thus  ha|)pcu  (hat, 
in  a  given  case,  the  body  of  law  or  rules  which  are  to  govern 
the  relations  of  the  partners  as  between  themselves  is  to  be 
gathered  from  a  variety  of  sources.  As  was  said  in  one  case : ' 
"The  duties  and  obHgations  arising  from  the  relation  be- 
tween  the  parties  are  regulated  by  the  express  contract 

1  Smith  V.  Jeyes.  4  Beavan  (Eng.  Ch.),  503. 
59 


§  77.]  LAW    OF   PARTNERSHIP. 

between  them  so  far  as  the  express  contract  extends  and 
continues  in  force;  but  if  the  express  contract,  or  so  much 
of  it  as  contiuues  in  force,  does  not  reach  to  all  those  duties 
and  obligations,  they  are  implied  and  enforce :1  by  the  law; 
and  it  is  often  matter  to  be  collected  and  inferred  from  the 
conduct  and  practice  of  the  })arties  whether  they  have  held 
themselves,  or  ought  or  ought  not  to  be  held,  bound  by  the 
particular  provisions  contained  in  their  express  agreement." 
In  another  case,^  in  which  the  question  was  whether  the 
defendant  was  entitled  to  draw  a  salary  in  half  years  when 
there  were  no  net  profits,  the  court  said :  "  This  question  is 
open  to  doubt  if  the  partnership  articles  alone  are  looked  at, 
but  its  determination  does  not  depend  merely  upon  the  con- 
struction which  would  be  given  to  the  partnership  articles, 
taken  by  themselves  alone.  It  is  a  general  rule  for  the  con- 
struction of  written  instruments,  including  statutes,  deeds 
and  contracts,  that  when  the  language  is  open  to  doubt,  and 
parties  whose  interests  are  diverse  have  from  the  outset 
adopted  and  acted  upon  a  particular  construction,  such  con- 
struction will  be  of  great  weight  with  the  court,  and  will 
usually  be  adopted  by  it."  This  rule  has  full  force  in  the 
construction  of  partnership  articles,  and  a  practical  construc- 
tion given  for  several  years  by  the  partners  themselves  to 
language  which  would  otherwise  be  open  to  doubt  will  usu- 
ally be  accepted  by  the  court  as  conclusive." 

§  77.  Of  the  coiistniction  of  articles.—  In  endeavoring 
to  determine  what  the  parties  intended  by  their  express  pro- 
visions, certain  rules  of  construction  have  been  laid  down  by 
the  courts.  Among  these,  the  most  important  is  that  which 
gives  prominence  to  the  general  purpose  and  object  of  the 
partnership.  If  certain  of  the  provisions  of  the  articles  are 
capable  of  two  constructions,  one  of  which  would  promote 

1  Winchester  v.  Glazier  (1890),  153  378 ;  Stevenson  v,  Erskine,  99  Mass. 
Mass.  316,  25  N.  E.  Rep.  728,  9  L.  R.  367:  Lovejoy  v.  Lovett,  124  Mass. 
A.  424»  270, 274;  Chicago  v.  Sheldon,  9  Wall. 

2  Citing  Stone  v.  Clark,  1  Mete.  50,  54. 

60 


SOME    IXCIDEXT3    OF    PARTNEKSHIP.  [§  78. 

while  the  other  would  retard  or  defeat  that  general  purpose 
or  object,  the  former  construction  is  to  be  preferred;  so  if 
powers  claimed  would,  b}-  their  exercise,  advance  the  general 
abject,  their  existence  will  be  more  readily  inferred  than  if 
ther  are  obstructive  to  it.  In  the  same  line  are  the  other 
rules  of  construction,  that  powers  conferred  are  to  be 
deemed  to  have  been  so  conferred  with  a  view  to  the  benefit 
of  all  concerned,  and  hence  that  an  exercise  of  it  for  the 
benefit  of  one  to  the  detriment  of  the  others  was  not  reallv 
intended,  though  the  words  used  might,  upon  their  face, 
bear  such  a  construction;  and  that  any  provision,  however 
worded,  is,  if  possible,  to  be  so  construed  as  to  prevent  one 
partner  from  defrauding  another  in  reliance  upon  its  letter, 
but  in  violation  of  its  spirit.' 

§  78.  Of  waiving  or  enlarging  express  provisions  by 
conduct. —  Any  written  stipulation,  however  express,  is 
capable  of  being  modified,  superseded  or  abandoned  by  the 
consent  of  all  of  the  partners;  and  this  consent  maj^  be 
shown  not  only  by  express  words,  but  by  conduct  or  the 
established  practice  of  the  parties.  But  the  unanimous  con- 
sent of  all  is  necessary,  for  a  portion  cannot  alter,  modify  or 
enlarge  the  contract  of  all. 

In  an  English  case'  it  was  said  by  Lord  Eldon:  "In  ordi- 

iSee  Blissett  v.  Daniel  (1S53),  10  only  be  evidenced  by  writing,  but 

Hare  (Eng.   Ch.).  493;     Petty t  v.  also  by  the  conduct  of  the  parties 

Janeson  (1819),  G  Maddock  (Eng.  in  relation  to  the  agreement  and 

Ch.),  146.  to  their  mode  of  conducting  their 

2  Const  V.  Harris  (1824),  1  Tur.  &  business:  \vhen,  therefore,  there  is 

Rus.  49G.   So  in  England  V.  Curling  a  variation  and  alteration  of  the 

(1844),  8  Beavan,  129,  it  was  said  terms  of  a  partnership,  it  does  not 

by  Lord  L;^ngdale :  "  With  respect  follow  that  there  was  not  a  binding 

to  a  partnership  agreement,  it  is  to  agreement    at    first.     Partners,   if 

be  observed  that,  all  parties  being  tliey  please,  may,  in  the  course  of 

competent  to  act  as  they  please,  the  partnership,  daily  come  to  a 

they  may  put  an  end    to  or  vary  new  arrangement  for  the  purj^so 

it  at  any  moment;  a  partnership  of  having  some  addition  or  altera- 

agreement    is    therefore    open   to  tion  in  the  terms  on  which  tJiey 

variation  from  day  to  day,  and  the  carry  on  business,  provided  those 

terms  of  such  variations  may  not  additions  or  alterations  be  mado 

61 


§§  79,  SO.]  LAW    OF    PARTNERSHIP. 

nary  partnerships  nothing  is  more  clear  than  this :  that,  al- 
though partners  enter  into  a  written  agreement,  stating  the 
terms  upon  w^hich  the  joint  concern  is  to  be  carried  on,  yet 
if  there  be  a  long  course  of  dealing,  or  a  course  of  dealing 
not  long,  but  still  so  long  as  to  demonstrate  that  they  have 
all  agreed  to  change  the  terms  of  the  original  w^ritten  agree- 
ment, they  may  be  held  to  have  changed  those  terms  by 
conduct.  For  instance,  if  in  a  common  partnership  the  par- 
ties agree  that  no  one  of  them  shall  draw  or  accept  bills  of 
exchange  in  his  own  name  without  the  concurrence  of  the 
others,  yet,  if  they  afterwards  slide  into  a  habit  of  permit- 
ting one  of  them  to  draw  or  accept  bills  without  the  con- 
currence of  the  others,  this  court  will  hold  that  they  have 
varied  the  terms  of  the  origin;d  agreement  in  that  respect." 

§  79.  Of  continuing  partnership  under  former  articles. 

When  a  partnership  has  existed  under  articles  providing  for 
a  definite  term,  and  upon  the  expiration  of  that  term  the 
partnership  is  continued  without  any  new  agreement,  the 
original  articles  will  continue  to  regulate  the  rights  and  ob- 
ligations of  the  partners,  though  the  continuing  partnership 
will  usually  be  deemed  to  be  at  will  merely  and  not  renewed 
for  a  similar  term.  The  original  articles  may  also  survive 
changes  in  the  persons  comprising  the  firm,  and  be  continued 
by  their  adoption  by  the  new  firm.^ 

§  80.  Of  the  usual  clauses  in  partnership  articles. — 

The  subjects  most  commonly  covered  by  the  partnership  ar- 
ticles are:  (1)  the  nature,  name  and  place  of  the  business; 

(2)  the  commencement  and  duration  of  the   partnership; 

(3)  the  capital  and  property  of  the  firm;  (4)  the  share  of 

with  the  unanimous  concurrence        i  See  Metcalfe  v.  Bradshaw  (1893), 

of  all  the  partners."  See,  also,  Scud-  145  111.  124,  33  N.  E.  Rep.  1116,  36 

derv.  Ames (1886),  89  Mo.  496;  Gam-  Am.  St.  Rep.  478;    United  States 

mon   V.  Huse  (1881),  100   111.   234;  Bank  v.  Binney  (1828),  5  Mason  (U. 

Gage  V.  Parmlee  (1877).  87  111.  329;  S.  C.  C.),  176;  Boardman  v.  Close 

Thrall  v.  Seward  (1865),  37  Vt.  573;  (1876),  44  Iowa,  428;    Sangston  v. 

Gregg  V.  Hord  (1889),  129  111.  613,  Hack  (1879),  52  Md.  173. 
22  N,  E.  Rep.  528. 

62 


SOME    INCIDENTS    OF    PARTXERSIIIP.  [§§  SI,  S2. 

each  in  the  profits  and  losses ;  (5)  the  conduct  and  powers 
of  the  partners;  and  (6)  the  dissolution  and  winding  up  of 
the  firm.  Many  other  subjects  are  introduced  in  special 
cases.  A  form  of  articles  which  may  prove  to  be  suggestive 
is  printed  in  an  appendix. 

§  81.  Of  the  enforcement  of  the  provisions. —  It  is  cus- 
tomary to  include  provisions  for  arbitration  in  case  of  dis- 
putes, and  for  fixing  the  value  of  shares  by  that  method  in 
case  of  the  retirement  of  a  partner.  Prov^isions  are  also  fre- 
quentl}^  inserted  for  making  offers  to  buy  or  sell  in  case  of 
dissolution ;  for  giving  indemnity  against  debts  to  the  retir- 
ing partner ;  for  taking  in  new  partners ;  for  permitting  the 
representatives  of  a  deceased  partner  to  be  admitted ;  for 
expelling  a  partner;  and  the  like.  Many  of  these  provisions 
can  have  only  a  negative  effect,  for  it  is  well  settled  that 
agreements  to  become  partners,  agreements  to  continue  a 
partnership  for  a  definite  time,  agreements  to  submit  dis- 
puted matters  to  arbitration,  and  agreements  to  admit  new 
partners,  will  not  be  specifically  enforced  by  the  courts,  but 
the  parties  will  be  left  to  such  remedy  as  they  may  find,  if 
any,  in  an  action  for  the  breach  of  the  agreement.  The  exe- 
cution of  formal  instruments  clearly  provided  for  may  be 
specifically  enforced,  including  even  the  execution  of  part- 
nership articles,  -where  that  is  necessary  to  confer  upon  one 
party  a  right  to  which  he  is  entitled,  even  though  the  part- 
nership thereby  created  may  be  immediately  dissolved.^ 

II.  Of  the  Ft  km  Name. 

^  82.  Of  the  need  of  a  firm  name. —  A  firm  name  is  a 
customary  but  not  a  necessary  incident  of  a  partnership.  As 
has  been  seen,  the  partnership  is  not,  in  legal  contempla- 

JSee  England  v.  Curling  (1844),     118  Mass.   279,   19  Am.    Rep.  459; 
8  Beavan  (Eng.  Ch.),  129;  Buck  v.     Tobey  v.  Bristol  County,  3  Story 
Smith  (1874),  29  Mich.  10(5,  18  Am.     (U.  S.  C.  Ct.),  819. 
Rep.  84;  Somerby  v.  Buntin  (1875), 

63 


§  S3.]  LAW   OF   PARTNERSHIP. 

tion,  a  distinct  and  separate  entity,  but  merely  a  collection 
of  individuals  with  whom,  for  most  purposes,  the  law  deals 
as  such.  A  firm  name,  therefore,  is  not  indispensable,^  but 
it  is  a  matter  of  convenience  in  identifying  and  ascertaining 
the  individuals  interested;  and  when  a  firm  name  has  been 
adopted,  it  ought  always  to  be  used  in  the  partnership  trans- 
actions. 

§83.  What  name  may  l)e  adopted. —  In  some  states,  as 
in  IS'ew  York,  statutes  have  been  enacted  forbidding  the  use 
of  the  name  of  a  person  not  actually  interested  in  the  firm, 
or  the  use  of  the  term  "&  Co."  unless  it  represents  an  actual 
partner.'-  But  where  no  statute  prevents,  the  firm  may 
adopt  any  name  it  chooses,  so  long  as  it  does  not  interfere 
with  the  rights  of  others.  It  may  thus  use  the  name  of  a 
stranger,  of  a  single  partner  or  of  a  portion  of  the  partners, 
or  it  may  adopt  a  wholly  fictitious  name.  It  may  also  ac- 
quire a  name  by  usage,  even  though  it  has  another  fixed  by 
the  agreement  of  the  jDartners.  And  though  it  may  have  a 
regular  firm  name,  it  may  be  bound  by  the  use,  in  a  single 
transaction,  of  some  other  name.*     It  may  change  or  add  to 

1  See  Meriden  Nat.  Bank  v.  Gal-  or  a  corporation,  see  Birmingham 
laudet  (1890),  120  N.  Y.  298,  24  N.  E.  Loan  Co.  v.  First  Nat.  Bank  (1893), 
Rep.  994.  100  Ala.  249,  46  Am.  St.  Rep.  45; 

2  As  to  the  use  of  the  term  "&  Clark  v.  Jones,  87  Ala.  474:  Sey- 
Co.,"  when  forbidden  by  statute,  mour  v.  Harrow  Co.,  81  Ala.  250. 
see  Gay  v.  Seibold  (1884),  97  N.  Y.  "  An  obligation  under  seal  exe- 
472,  49  Am.  Rep.  533;  Sparrow  v.  cuted  by  all  the  members  of  a  firm, 
Kohn  (18S5),  109  Pa.  St.  359.  58  Am.  in  and  for  its  business  and  for  its 
Rep.  726;  Wood  v.  Railroad  Ca  benefit,  binds  the  firm  although 
(1878),  72  N.  Y.  196,  28  Am.  Rep.  the  firm  name  is  not  mentioned, 
125;  Zimmerman  v.  Erhard  (1880),  and  although  it  appears  ujwn  its 
83  N.  Y.  74,  -38  Am.  Rep.  396.  Where  face  to  be  simply  the  obligation  of 
no  such  statute  exists,  the  use  of  the  partners  contracted  in  their  in- 
"&  Co."  raises  no  necessary  pre-  dividual  names.  Berkshire  Woolen 
sumption  that  it  represents  a  part-  Co.  v.  Juillard  (1879).  75  N.  Y.  535, 
ner.  Robinson  v.  Magarity,  28  111.  31  Am.  Rep.  489.  A  firm  is  bound 
423;  Brennanv.  Pardridge,  67Mich.  by  an  acceptance  in  an  agent's 
449.  As  to  whether*  the  firm  name  name  which  it  has  adopted  as  a 
is  such  as  to  import  a  partnership  firm  name  by  an  agreement  of  the 

64 


SOME    INCIDEISTS   OF    PARTNERSHIP.  [§  84. 

its  name  at  any  time.  It  may  acquire  rights  in  its  firm 
name  and  transfer  them  in  the  individual  names  of  the  part- 
ners, and  vice  versa.  Whatever  the  name  used,  it  may  be 
shown  by  parol  evidence  who  the  persons  were  who  were 
represented  by  it. 

§  84.  What  may  be  done  in  the  firm  name. —  As  a  gen- 
eral rule,  all  simple  contracts,  written  or  unwritten,  nego- 
tiable or  non-negotiable,  whether  creating  rights  or  imposing 
obligations,  may  be  made  in  the  firm  name,^  and,  as  will  be 
seen,^  one  partner  has  usually  implied  authority  to  bind  the 
firm  by  contracts  made  in  its  name  for  partnership  purposes. 
But  one  partner  has  no  implied  authority  to  bind  the  firm 
by  an  instrument  under  seal,  and,  in  general,  conveyances  of 
real  estate  cannot  be  made  either  by  or  to  the  firm  in  the 
firm  name.  Such  conveyances  will,  however,  usually  oper- 
ate to  convey  an  equitable  interest  which  may  be  enforced 
in  a  court  of  chancery;  and  where  a  conveyance  of  real  es- 
tate is  made  to  a  firm  in  the  name  of  the  firm  which  con- 
tains the  full  name  of  one  or  more  of  the  partners,  a  legal 
title  will  generally  be  held  to  vest  in  those  partners  whose 
names  appear^  and  equity  will  charge  them  as  trustees  for 
all.» 

partners  to  do  business  under  the  taken  in  the  firm  name.  Hendren 
name  of  such  agent,  where  it  does  v.  Wing  (1895),  60  Ark.  561, 31  S.  W. 
not  appear  that  the  agent  was  Rep.  149.  As  to  real  estate  mort- 
doing  business  also  on  his  own  ac-  gage,  see  Woodward  v.  McAdam 
count;  but  if  that  fact  appears,  it  (1891),  101  Cal.  438. 
must  be  shown  that  lie  accepted  ■*  See  jiost,  §  164. 
the  bill  on  account  of  the  partner-  ^  A  deed  to  John  Smith  &  Co.  op- 
ship  in  order  to  bind  it.  Bank  of  erates  to  vest  the  entire  legal  title 
Rochester  v.  Monteath  (1845),  1  in  John  vSmitli  alone.  Winter  v. 
Denio  (N.  Y.)  402,  43  Am.  Dec.  G81.  Stock,  29  Cal.  407,  89  Am.  Dec.  57; 
See,  also,  Le  Roy  v.  Johnson,  2  Moreau  v.  Saffarans,  3  Sneed 
Peters  (U.  S.),  186;  Ripky  v.  Colby  (Tenn.),  595,  07  Am.  Dec  583.  A 
(1851),  23  N.  H.  i'iH;  (ietchell  v.  mortgage  of  real  estate  given  to 
Foster,  106  Mass.  43;  Uhler  v.  "  Farnham  &  Lovejoy,  of  the 
Browning,  28  N.  J.  L,  79;  Baicioft  county  of  Hennepin,  state  of  Min- 
V.  Haworth,  29  Iowa,  402.  nesota,"  is  legally  su/Ticiejit  as  a 
•  A  chattel  mortgage  may  bo  mortgage  to  S.  AV.  Farnliam  and 
5                                              65 


§  85.]  LAW    OF    PARTNERSHIP. 

Unless  authorized  by  statute,  actions  cannot  be  maintained 
either  by  or  against  the  partnership  in  the  firm  name,  but 
must  be  brought  in  the  individual  names  of  the  partners.^ 

§  85.  Of  the  firm  name  as  property. —  "  The  name  by 
which  a  firm  is  known,"  says  Mr.  Justice  Lindley,^  "  is  not 
of  itself  the  property  of  the  firm,  and  there  is  nothing  at 
common  law  to  prevent  persons  from  carrying  on  business 
in  partnership  under  any  name  they  please."  Notwithstand- 
ing this,  however,  it  is  clear  that  the  firm  name  is  a  thing  of 
value,  which  may  be  made  the  subject  of  sale  or  assignment. 
It  is  also  a  thing  which  the  law  will  protect.  Thus  Mr. 
Lindley  continues:  "One  firm  is  not  at  liberty  to  mislead 
the  public  by  so  using  the  name  of  another  firm  as  to  pass 
off  themselves  or  their  goods  for  that  other  or  for  the  goods 
of  that  other.  Moreover,  an  established  firm  can  prevent  a 
company  (corporation)  from  registering  under  the  name  of 
the  firm." 

But  the  rule  that  one  firm  cannot  adopt  the  same  name  as 
another  firm  is  subject  to  the  qualification  that  a  person  or 
a  number  of  persons,  who  have  not  limited  their  right  by 
contract,  cannot  be  prevented  from  using  his  or  their  own 
name,  even  though  it  be  that  of  a  former  firm  in  the  same 
business,*  provided  it  is  done  in  good  faith  and  with  no  at- 
tempt to  mislead  the  public  as  to  the  identity.* 

J.  A.  Lovejoy,  shown  to  have  been  73  Ind.  281;  Ladiga  Saw  Mill  Co. 

the  members  of  a  firm  engaged  in  v.  Smith,  78  Ala.  108. 
business  in  that  county  under  that        ^  Lindley  on  Partnership  (Ewell's 

name.     Menage  v.  Burke  (1890),  43  2d  Am.  ed.),  p.  114. 
Minn.  211,  19  Am.  St.  Eep.  235.    See,        3  See  Williams  v.  Farrand  (1891), 

also,    Townshend     v.    Goodfellow  88  Mich.  473,  50  N.  W.  Rep.  446,  14 

(1889),   40   Minn.   312,   12  Am.   St.  L.  R.  A.  161;  Russia  Cement  Co.  v. 

Rep.  736;  Kelley  v.  Bourne,  15  Ore.  Le  Page  (1888),  147  Mass.  206,  17  N. 

476.  E.  Rep.  304,  9  Am.  St.  Rep.  685; 

1  Statutes  in  some  states  permit  Meneely  v.  Meneely  (1875),  62  N.  Y. 

suits  to  be  brought  in  the  firm  427,   20   Am.   Rep.   489;  Rogers  v. 

name.     See  Whitman  v.  Keith,  18  Rogers  (1885),  53  Conn.  121,  55  Am. 

Ohio  St.  134;  Fitzgerald  v.  Grim-  Rep.  78. 

mell,  64  Iowa,  261;  Love  v.  Blair,        ■*  Where  such  an  attempt  appears, 

66 


SOME    INCIDENTS    OF    PARTNERSHIP.  [§  SG. 

§86.  Of  the  right  to  the  firm  name  upon  dissohition. — 

The  firm  name,  as  has  been  seen,  ma}'  be  one  of  two  kinds, — 
it  may  be  a  fictitious  name,  like  "  The  Ann  Arbor  Hardware 
Co.,"  or  it  ma}"  be  a  purely  personal  one,  made  up  of  the  in- 
dividual names  of  the  partners,  like  "Smith  &  Jones;"  and 
some  difference  in  legal  consequences  follows  the  distinction: 

1.  Upon  the  dissolution  of  the  partnership  by  mere  lapse 
of  time  or  otherwise,  neither  partner  buying  out  the  other, 
either  would  have  the  right  to  go  into  business  for  himself 
and  adopt  the  old  firm  name  if  it  was  a  fictitious  one  and 
could  be  used  without  leading  the  public  to  believe  that  the 
old  firm  still  continued;  but  neither  would  have  the  right 
to  use  the  old  firm  name  including  the  individual  names  of 
any  partner  who  did  not  continue  with  him,  nor  to  announce 
himself  "  successor  to "  the  old  firm,  though  either  might 
designate  himself  as  ^^ formerly  of''  the  old  firm;  but  he 
must  do  nothing  to  deceive  the  public,  as  by  putting  his  own 
name  and  the  "formerly  of"  in  very  small  letters,  and  the 
old  firm  name  in  very  large  letters.^ 

2.  Upon  the  dissolution  of  a  partnership  by  death,  it  has 
been  held  that  the  survivor  has  the  ris^ht  to  continue  the  use  of 
the  old  name,  whether  fictitious  or  personal;-  but  the  true 
rule  seems  to  be  that  the  name,  if  of  value,  is  a  partnership 
asset,  and  must  be  dealt  with  as  such.' 

3.  If  one  partner  buys  out  the  other  for  the  purpose  of 
continuing  the  business,  but  nothing  is  expressly  agreed  upon 
in  reference  to  the  name,  the  sale  by  one  of  all  his  interest 
in  the  business,  and  a  fortiori  if  the  good-will  be  expressly 
included,  gives  to  the  continuing  partner  the  exclusive  right 
to  continue  the  use  of  tlie  old  firm  name  if  it  Ije  a  fictitious 

the  use  may  be  enjoined,     Bininger  4  Abb.  Pr.  (X.  Y.)  :5!M:  Holbrook  v. 

V.  Clark  (1870),  60  Barb.  (N.  Y.)  113.  Nesbitt  (1H95),  103  Mass.  120.  3!)  N. 

1  See  Hookham  v.  Pottage  (1872),  E.  Rep.  794. 

L.   R.   8    Ch.   App.   91;     Smith   v.  -See  Lewis  v.  Langdon, 7 Simons 

Cooper  (1877),   5  Abb.   New    Cas.  (Eng.  Ch.),  421. 

(N.   Y.)  274;  Morgan  v.   Schuyler  ^See  Fenn  v.  BoUes,  7  Abb.  Pr. 

(1880),  79  N.  Y.  490,  35  Am.  Rep.  (N.  Y.)  421. 
543;  Peterson  v.  Humphrey  (1857), 

67 


§  ST.] 


LAW    OF   PARTNERSHIP. 


one,  but  not  if  it  be  a  purely  personal  one  containing  the 
name  of  the  retiring  partner,  except  where  the  personal 
name  has  been  made  a  trade-mark  of  the  business.  The  re- 
tiring partner  may  go  into  business  in  his  own  name,  but 
he  must  not  use  even  his  OAvn  name  in  such  a  manner  as  to 
mislead  the  public  into  believing  that  he  is  the  old  firm.^ 

4.  The  retiring  partner  may,  however,  by  express  agree- 
ment invest  the  continuing  partner  with  the  right  to  con- 
tinue the  former  firm  name,  though  it  is  a  purely  personal 
one;  and  the  retiring  partner  may,  in  the  same  manner, 
limit  his  own  right  to  resume  business  or  to  use  or  permit 
to  be  used  his  own  name  in  connection  with  a  new  business 
to  compete  with  the  old,^ 

III.   Of  the  Good-will. 

§  87.  What  is  meant  hy  the  good-will.— What  is  known 
as  the  "  good-w411 "  of  the  business  may  properly  be  consid- 
ered in  connection  with  the  name.  The  good-will  is  regarded 
as  a  valuable  incident  of  the  business,  and  may  be  sold  or 
transferred  as  such.  Precisely  what  it  is  the  courts  have 
found  it  difficult  to  define.     "  The  term  good-will,"  says 


1  See  Williams  v.  Farrand  (1891), 
88  Mich.  473,  50  N.  W.  Rep.  446,  14 
L.R.  A.  161 ;  Vonderbank  V.  Schmidt 
(1892),  44  La.  Ann.  264,  10  So.  Rep. 
616,  32  Am.  St.  Rep.  336,  15  L.  R.  A. 
462  and  note ;  Brass  and  Iron  Works 
Co.  V.  Payne  (1893),  50  Ohio  St.  115, 
19  L.  R.  A.  82;  Myers  v.  Kalamazoo 
Buggy  Co.  (1884),  54  Mich.  215,  19 
N.  W.  Rep.  961,  20  id.  545,  52  Am. 
Rep.  811;  Snyder  Manufacturing 
Co.  V.  Snyder  (1896),  —  Ohio  St. 
— ;  43  N.  E.  Rep.  825.  As  to  the 
use  of  individual  names  as  trade- 
marks, see  Fish  Bros.  Wagon  Co.  v. 
Fish  (1892),  82  Wis.  546, 52  N.  W.  Rep. 
545,  33  Am.  St.  Rep.  72,  16  L.  R  A. 


453:  Marshall  v.  Pinkham  (1881),  52 
Wis.  585,  9  N.  W.  Rep.  615,  38  Am. 
Rep.  756;  Russia  Cement  Co.  v.  Le 
Page  (1888),  147  Mass.  206,  17  N.  E. 
Rep.  304, 9  Am.  St.  Rep.  685;  Shaver 
V.  Shaver  (1880),  54  Iowa,  208,  37 
Am.  Rep.  194,  6  N.  W.  Rep.  188. 

'^See  Grow  v.  Seligman  (1882),  47 
Mich.  607,  41  Am.  Rep.  737;  Frazer 
V.  Frazer  Lubricator  Co.  (1887),  121 
111.  147,  13  N.  E.  Rep.  639,  2  Am.  St. 
Rep.  73;  Symonds  v.  Jones  (1890), 
82  Me.  302,  19  Atl.  Rep.  820, 17  Am. 
St.  Rep.  485,  8  L.  R.  A.  570;  Le  Page 
Co.  V.  Russia  Cement  Co.  (1892),  51 
Fed.  Rep.  941, 17  L.  R.  A.  354, 5  U.  S. 
App.  112. 


68 


SOME   INCIDEXTS    OF   PARTNERSHIP.  [§  S7. 

Mr.  Justice  Lindley,^  "  can  hardly  be  said  to  have  anv  pre- 
cise signification.  It  is  generally  used  to  denote  the  benefit 
arising  from  connection  and  reputation;  and  its  value  is  what 
can  be  got  for  the  chance  of  being  able  to  keep  that  connec- 
tion and  improve  it."  Mr.  Justice  Story-  describes  it  as  the 
benefit  or  advantage  "  which  is  acquired  by  an  establishment 
beyond  the  mere  value  of  the  capital,  stock,  funds  or  property 
employed  therein,  in  consequence  of  the  general  public  pat- 
ronage and  encouragement  which  it  receives  from  constant 
or  habitual  customers  on  account  of  its  local  position,  or 
common  celebrity,  or  reputation  for  skill  or  affluence,  or 
punctuality,  or  from  other  accidental  circumstances  or  neces- 
sities, or  even  from  ancient  partialities  or  prejudices."  Lord 
Eldon ^  declared  that  "the  good-will  of  a  trade  is  nothino- 
more  than  the  probability  that  the  old  customers  Avill  resort 
to  the  old  place;"  and  this  is  approved  bj''  Mr.  Parsons,^ 
who  says:  "It  is  a  hope  or  expectation,  w^hich  may  be  rea- 
sonable and  strong,  and  may  rest  upon  a  state  of  things  that 
has  grown  up  through  a  long  period  and  been  promoted  by 
large  expenditures  of  money.  And  it  may  be  worth  all  the 
money  it  has  cost,  and  a  great  deal  more ;  but  it  is,  after  all, 
nothing  more  than  a  hope,  grounded  upon  a  probability." 

The  term  "good-will,"  however,  as  is  pointed  out  in  a  late 
case^  in  IS'"ebraska,  is  often  used  in  three  different  senses: 
1.  That  above  indicated;  2.  Where  it  is  connected  with  or 
includes  a  trade-mark  or  trade-name ;  "^  and  3.  Where  it  is 
coupled  with  an  express  agreement  not  to  compete  with  the 
business  with  Avhich  it  is  connected.  The  first  is  the  true 
use,  and  it  is  in  that  sense  that  the  term  is  here  used. 

•1  Lindley  on  Purtnorship  (Ew-  •»  Parsons  on  riirtiior8liip(ltlied.), 

ell's  2d  Am.  ed.),  439.  §  181. 

'  Story  on  Partnership,  §  99.  *  Lobeck  v.  Hardware  Co.  (1893). 

3  In  Cruttvvell  v.  Lye.  17  Ves.  335,  37  Neb.  158,  55  N.  W.  Rep.  050,  23 

340.     Many  later  cases,   however,  L.  R,  A.  795. 

regard  this  definition  as  too  nar-  <•  As  an  illustration  of  this  form, 

row.     See   Trego    v.    Ifiint   (1890),  the  court  cited   Smith  v.   WmIUi-i- 

Ap.  Cas.  7.  (1885),  57  Mich.  450,  23  N.  W.  lU-iu 

09 


§§  88,  89.]  LAW   OF   PARTNERSHIP. 

§  88.  Good-will  as  an  asset. —  The  good-will  is  a  partner- 
ship asset.  As  a  rule,  it  inheres  in  the  business  and  not  in 
the  locality,  though  in  the  case  of  hotels,  theaters  and  simi- 
lar places  the  rule  is  otherwise.^  It  does  not  attach  to  the 
stock  in  trade,  and  does  not  necessarily  pass  with  a  sale  of 
the  stock.  It  does  pass,  however,  with  a  sale  of  the  busi- 
ness, or  of  all  interest  in  or  assets  of  the  business.- 

§  89.  Disposition  of  good-will  on  dissolution.— Upon  a 

voluntary  dissolution  of  the  business,  the  good-will  is  an 
asset  and  will  be  sold  for  the  benefit  of  the  partners,  if 
either  partner  desires  such  sale.^  Upon  a  dissolution  by 
death,  the  good-will  does  not  go  to  the  survivor  alone,  but  is 
still  a  firm  asset  for  whose  value  he  must  account  if  he  ob- 
tains the  benefit  of  it.^ 

The  sale  by  one  partner  of  the  good-will  does  not,  qfitseJ-f, 
carry  the  right  to  the  firm  name,  if  it  be  a  personal  one  in- 
cluding the  name  of  the  retiring  partner,  unless  it  has  been 
made  a  trade-mark ;  neither  does  it,  of  itself  and  in  the  ab- 
sence of  an  agreement  not  to  do  so,  operate  to  prevent  the 
retiring  partner  from  starting  a  new  business  in  competition 
with  the  old,  or  even,  it  has  been  held,  prevent  him  from 

267,  24  id.  830,  26  id.  783.  See.  also,  (1869),  62  Pa.  St.  81, 1  Am.  Rep.  382 
as  to  the  effect  of  the  sale  of  busi-  Booth  v.  Jarrett  (1876),  52  How.  Pr 
ness  and  good-will  where  the  firm  (N.  Y.)  169;  Woodward  v.  Lazar 
name  has  been  made  a  trade-mark,  (1863),  21  Cal.  448,  82  Am.  Dec.  75; 
Horton  Mfg.  Co.  v.  Horton  Mfg.  Armstrong  v.  Kleinhaus  (1884),  82 
Co.,  18  Fed.  Rep.  816;  Snyder  Mfg.  Ky.  303,  56  Am.  Rep.  894. 
Co.  V.  Snyder  (1896),  —  Ohio  St.  2Hoxie  v.  Chaney  (1887).143Mass. 
— ,  43  N.  E.  Rep.  325.  In  the  for-  592.  58  Am.  Rep.  149;  Merry  v. 
mer  case  the  court  said;  "If  one  Hoopes  (1888),  111  N.  Y.  415;  Will- 
has  made  of  his  own  name  a  trade-  iams  v.  Farrand  (1891),  88  Mich.  473, 
mark,  and  then  transfers  to  an-  50  N.  W.  Rep.  446,  14  L.  R.  A.  161. 
other  his  business,  in  which  his  ^  Sheppard  v.  Boggs  (1879),  9  Neb. 
name  has  been  so  used,  the  right  257;  Snyder  Mfg.  Co.  v.  Snyder 
to  continue  such  use  of  the  name  (1896),  —  Ohio  St.  — ,  43  N.  E.  Rep. 
will  doubtless  follow  the  business  325. 

as  often  as  it  may  be  transferred."  ■*  Smith  v.  Everett  (1859),  27  Bear. 

1  Chittenden  v.  Witbeck  (1883),  (Eng.    Ch.)  446;    Rammelsberg   t. 

50  Mich.  401;  Musselman's  Appeal  Mitchell  (1876),  29  Ohio  St.  22. 

70 


SOME    INCIDENTS    OF   PARTNERSHIP.  [§§  90-92. 

soliciting  the  trade  of  the  old  customers;  though  it  Avill  pre- 
vent him  from  carrying  on  the  new  business  in  such  a  way 
as  to  make  it  appear  to  be  the  old  one.^ 

ly.  Of  the  Capital  of  the  Firm. 

§  90.  What  constitutes  capital.— The  capital  of  the  firm 
is  the  aggregate  of  the  sums  which  the  partners  have  agreed 
to  contribute  for  the  transaction  of  the  partnership  business. 
It  differs  from  the  property  of  the  firm,  inasnmch  as  the 
capital  is  a  fixed  sum,  while  the  amount  of  property  pos- 
sessed by  the  firm  may  vary  from  time  to  time,  and  be  more 
or  less  than  the  capital.  It  differs  also  from  advances  made 
by  the  partners  to  the  firm,  for  the  latter  are  in  the  nature  of 
loans  to  the  firm,  and  not  contributions  to  its  fixed  capital.^ 

§  91.  Fixing  amount  and  interests. —  In  the  final  distri- 
bution of  assets  upon  the  winding  up  of  the  partnership 
business,  capital  is  usually  to  be  distributed  among  the  part- 
ners in  proportion  to  the  capital  contributed,  and  it  is  there- 
fore desirable  to  have  the  amount  of  the  capital  and  the 
shares  of  each  partner  definitely  fixed,  though,  where  noth- 
ing ap})ears  to  the  contrary,  it  will  be  presumed  that  their 
shares  are  equal. 

The  amount  of  the  capital  as  originally  determined  can- 
not subsequently  be  increased  or  diminished  without  the 
consent  of  all  of  the  partners. 

§  92.  What  may  be  received  as  contributions  to  capital. 

The  contributions  to  the  capital  need  not  be  in  iiioncy,  but 

1  See  Kiioedler  v.  Glaenzer  (1893),  good-will  to  his  partner  cannot,  ha- 

55  Fed.   Rep.   895,    14  U.  S.  App.  fore    the    dissolution    has     taken 

336,  20  L.  R.  A.  733;  Vonderhank  i)lace,  i)roceeil   to   copy    from  tlic 

V.  Schmidt  (1892),  44  La.  Ann.  204,  firm  books  the  names  of  tiie  iinn 

32  Am.  St.  Rep.  330,  15  L.  R.  A.  customers  for  the   purjtose  of  so- 

462;  Williams  v.  Farrand  (1891),  88  liciting  their  cusloin  when  the  dis- 

Mich.  473,  50  N.  W.  Rep.  446,  14  L.  solution    is    comi)lete.      Trego    v. 

R.  A.  101 :  Vernon  v.  IfaHam  (1880),  Hunt  (1896),  Ap.  Cas.  7. 

34  Ch.  Div.  748.     A  partner,  how-  -1  Lindley  on  Partnership  (H\v- 

ever,   who  has  agreed  to  sell  the  ell's  2d  ed.),  320. 

71 


§§  93,  94.]  LAW    OF    PAETNEESHIP. 

may  be  made  in  real  or  personal  property,  labor,  skill,  or 
whatever  the  parties  may  agree  to  receive  as  such.  Neither 
is  it  necessary  that  each  partner  shall  contribute  the  same 
kind  of  thing,  for  one  may  contribute  money  and  another 
property  and  another  skill,  and  the  like.  The  tise  only  of 
property  may  also  be  contributed,  the  partner  retaining  to 
himself  as  an  individual  the  title  to  it.  It  is  not  necessary 
that  the  several  contributions  shall  be  equal  in  amount  or 
value;  for  one  may  contribute  much  while  another  contrib- 
utes little. 

It  does  not  follow,  however,  where  one  contributes  money, 
and  the  other  skill,  experience  or  labor,  that  they  will  ulti- 
mately own  this  money  together  (though  capital  is  firm 
property,  and  though  property  bought  with  it  for  partner- 
ship purposes  would  be  partnership  property),  or  that  upon 
a  termination  of  the  partnership  they  will  share  it  in  com- 
mon; for,  as  will  be  seen,  upon  such  a  termination  each  part- 
ner is  to  be  repaid  his  contributions  to  capital  before  the 
profits  are  divided.^ 

Y.  Of  the  Pkoperty  of  the  Firm. 
1.   Of  Firm  Proj)erty  in  General. 

§93.  What  may  Ibe  partnership  property. —  The  prop- 
erty of  the  firm  may  be  that  originally  contributed  by  the 
partners  to  form  the  partnership  capital,  or  it  may  be  that 
subsequently  acquired  in  partnership  dealings.  It  may  be 
either  real  or  personal.  Unless  provided  otherwise  by  the 
articles  or  by  statute,  there  is  no  limit  to  the  kind  or  amount 
of  the  property  which  the  firm  ma}^  possess. 

Somewhat  different  rules  apply  when  the  property  is  real 
estate,  and  these  will  be  made  the  subject  of  separate  men- 
tion. 

§94.  What  constitutes  partnership  property. —  What 
property  is  partnership  property,  or  when  it  becomes  such, 

^See  Shea  v.  Donahue  (1885),  15  Whitcomb  v.  Converse  (1875),  119 
Lea  (Tenn.),  160,  54  Am.  Rep.  407;     Mass.  38,  20  Am.  Rep.  311. 

73 


SOME   INCIDENTS    OF    TAETNERSHIP.  [§§  95,  96. 

is  not  always  easy  to  determine,  "  Xot  only  all  the  goods 
and  merchandise  properl}^  so  called,"  says  Mr.  Parsons,^ 
"  but  all  chattels  bought  by  the  partnership,  or  otherwise 
coming  to  them,  as  their  furniture,  books,  etc.,  are  partner- 
ship property ;  and  so  also  all  bills  of  exchange  and  notes, 
or  other  evidence  of  debts,  and  all  debts  or  accounts  or  bal- 
ances, or  other  claims;  and  all  shares  in  companies,  or  scrip 
bought  -with  partnership  funds,  or  otherwise  assigned  to  tlie 
partnership  and  not  transferred  to  the  individual  partners 
and  charged  in  their  accounts,  would  be  regarded  as  part- 
nership property." 

§  95.  Same  subject  —  Property  bought  by  partuer  in 
his  owu  name. —  Whether  property  bought  by  one  partner 
in  his  own  name  is  partnership  property  depends  upon  the 
circumstances  and  the  intention.  One  partner  may,  of  course, 
bu}'  property  for  himself;  but  where  he  takes  title  in  his  own 
name  to  property  bought  with  partnership  funds,  there  is  a 
strong  presumption  that  it  is  partnership  property,  though 
he  may  show  that,  by  arrangement  with  his  ])artners,  it  was 
really  to  be  his  own;  as,  for  example,  that  tlio  funds  were 
loaned  to  him  with  which  to  buy  the  property  on  his  own 
account.  If,  however,  he  takes  title  in  himself  when  it  was 
his  duty  to  take  it  for  the  firm,  the  firm  may  require  him  to 
transfer  to  it;  and,  though  he  buys  in  his  own  name,  if  he 
Avas  really  buying  for  the  firm,  the  firm  is  liable  to  the  seller. 
It  is  simply  the  application  of  the  rules  of  agency,  the  firm 
being  the  principal,  and  the  partner  the  agent.'- 

§  90.  Same  subject  —  Property  used  by  the  lirirj. —  Not 

all  property  used  by  the  firm  is  firm  property;  foi',  as  has 
been  seen,  the  partners' contribution  to  the  firm  capital  may 
be  simply  the  use  of  property  and  not  its  title;  and,  (hiriiii;' 
the  continuance  of  the  relation,  the  firm  may  ac'(|uiri},  by 

1  Parsons  on   Partnership,^  177.     Miss.fJl.");  KniscliUc  v.  StiTan  (lSil'J\ 

2  See  Traphagon  v.  IJurt  (1876),  07    81}  Wis.  'Sl'.i,  5:j  N.  W.  U.-p.  U7U. 
N.  Y.  30;  Davis  v.  Davis  (1882),  CO 

7Ii 


§§  97,  98.]  LAW    OF   PARTNEESHIP. 

lease  or  otherwise,  the  right  to  use  or  employ  the  individual 
property  of  a  partner  as  well  as  of  a  stranger. 

§  97.  Nature  of  each  partner's  interest  in  the  firm 
property. —  In  the  absence  of  any  special  agreement  pre- 
scribing a  different  rule,  all  the  members  of  the  firm  are  in- 
terested in  the  lohole  of  the  partnership  property.  They 
are,  however,  neither  joint  tenants  nor  tenants  in  common, 
but  the  possessors  of  a  peculiar  interest.  That  interest  is 
simply  each  partner's  share  in  whatever  surplus  may  remain 
after  the  debts  and  obligations  of  the  firm  are  paid.^  It  is  a 
right,  not  to  partition  or  distribution  of  the  property  in  kind, 
but  to  have  the  assets  sold  and  the  proceeds  divided  after 
the  payment  of  partnership  debts  and  obligations.  The 
partners  may,  indeed,  by  agreement,  divide  the  surplus  of 
the  property  after  the  payment  of  the  debts,  in  kind,  if  they 
see  fit  to  do  so,  but  neither  can  claim  such  a  division  as  a 
matter  of  right ;  and  if  the  estate  is  settled  in  court  the 
property  will  be  sold  and  the  surplus  divided  in  money .'^ 
The  rule  is  the  same  whether  the  property  is  real  or  personal. 

§  98.  Extent  of  each  partner's  interest. —  This  share  or 
interest  of  each  partner  is  obviously  made  up  of  two  kinds 
of  items:  1.  That,  if  anything,  which  is  due  to  be  returned 
to  him  on  account  of  his  original  contributions  to  capital.^ 
2.  That,  if  anything,  which  is  due  to  him  on  account  of 
profits.*  The  distribution  of  profits,  of  course,  cannot  take 
place  until  the  contributions  to  capital  have  been  restored. 
The  ratio  of  distribution  of  the  two  funds  —  capital  and 
profits  —  '}nay  be  the  same,  but  it  is  not  necessarily  so.  It 
will  be  the  same  where  the  parties  have  agreed  that  profits 
or  losses  are  to  be  divided  in  the  same  proportions  as  the 

1  Sindelare  v.  Walker  (1891),  137    v.   Bristow  (1878).   73    N.   Y.   264, 
111.  43,  27  N.  E.  Rep.  59,  31  Am.  St.     Paige's  Partn.  Cas.  106. 
Rep.   353;    Menagh    v.    Whitwell        2  wild  v,  Milne  (1859),  26  Bea van, 
(1873),  52  N.  Y.  146, 11  Am.  Rep.  683,    504,  Ames'  Partn.  Cas.  173. 
Ames'  Cas.  on  Partn.  229 ;  Staats        ^  gee  post,  %  304. 

^Seeposf,  §§304,  305. 
74 


SOMll  INCIDENTS   OF    PARTNEKSHIP.  [§  99. 

contributions  to  capital;  but,  where  nothing  is  shown  re- 
specting such  an  agreement,  it  will  be  presumed  that  the 
profits  or  losses  are  to  be  shared  equally.  This  will  be  the 
presumption  even  though  it  appears  that  the  contributions 
to  capital  were  unequal.^  Speaking  of  shares  in  this  sense, 
that  is,  of  shares  in  the  profits  and  losses  as  distinct  from 
contributions  to  capital,  Mr.  Justice  Lindley  says :  "  Whether 
])artners  have  contributed  money  equally  or  uneciually, 
whether  they  are  or  are  not  on  a  par  as  regards  skill,  con- 
nection or  character,  whether  they  have  or  have  not  labored 
equally  for  the  benefit  of  the  firm,  their  shares  will  be  con- 
sidered as  equal  unless  some  agreement  to  the  contrary  can 
be  shown  to  have  been  entered  into."  ^ 

§  99.  The  transfer  of  shares.—  Such  being  the  nature  of 
a  partner's  share  or  interest,  it  is  clear  that  he  has  no  title 
to  any  specific  article  or  portion  of  the  partnership  property, 
and  hence  can  neither  assign,  sell  nor  mortgage  any  partic- 
ular portion  of  it  as  his  own.  The  utmost  that  he  can  do  is 
to  transfer  his  share  or  interest  in  the  whole  assets,  and  the 
value  of  such  share  or  interest  can  only  be  conclusively  de- 
termined upon  a  winding  up  of  the  partnership  affairs.*  Of 
this  nature  only,  therefore,  is  the  right  which  is  transferred 
by  a  partner's  sale  or  assignment  of  his  interest,  or  which 
l)asses  to  his  representative  upon  his  death,  or  which  can  be 
claimed  by  the  legatee  under  his  will,  or  which  devolves  upon 
his  assignee  in  bankruptcy  or  insolvency. 

A  partner  may,  indeed,  transfer  such  interest  as  he  has,  and 
this  limited  interest  will  often  bo  held  to  pass  under  a  convey- 
ance by  which  he  has  attempted  to  transfer  a  greater  right.^ 

1 1  Lindley  on  Partnersliip  (E\v-  Appeal  (18G9),  G3  Pa.  St.  194.  Paige's 

ell's  2d  Am.  ed.),  '-UH,  349;  Rol)inson  Partn.Cas.  16:3;  Sindelare  v.  Walker 

V.  Anderson,  20  Beavan,  98;  Pea-  (1«91),  137  111.  48,  27  N.  E.  Rep.  .VJ.Iil 

cock  V.  Peacock,  10  Ves.  49.  Am.  St.  Rep.  353;  Menaj^h  v.  Wliit- 

-'  1  Lindley  on  Partnership  (Ew-  well  (1873),  52  N.  Y.  1  U'..  1 1  A  in.  Rep. 

eirs  2d  Am.  ed.),  349.  683. 

3  Collins'  Appeal  (1883),  107  Pa.  <  See  Carrie  v.  Cloverdalo  Co.,  90 

St.  590,  52  Am.  Rep.  479 ;  Whigham's  Cal.  84. 


§§  100,  101.]  LAW    OF    PARTNEESHIP. 

The  transfer  of  his  interest,  however,  does  not  operate  to 
introduce  the  grantee  into  the  firm,  but  it  dissolves  the  part- 
nership, leaving  to  the  grantee  the  right  to  the  value  of  the 
share  acquired  as  determined  upon  the  final  accounting. 

An  exception  to  this  rule  of  dissolution  exists  in  joint- 
stock  companies,  mining  partnerships,  and  others  in  which, 
by  statute  or  agreement,  the  shares  of  the  members  are 
transferable. 

§  100.  Seizure  of  partner's  share  by  his  iiulividual 
creditor. —  In  most  states  the  share  or  interest  of  one  part- 
ner in  the  property  of  the  partnership  may  be  levied  upon 
and  sold  on  execution  at  the  suit  of  his  individual  creditors; 
but  no  specific  chattels  can  be  so  seized  or  sold,  and  the  only 
right  acquired  by  the  purchaser  is  the  right  to  an  accounting 
and  to  secure  the  partner's  interest  after  the  settlement  of 
the  partnership  affairs  and  the  payment  of  the  partnership 
debts.^ 

The  method  of  procedure  in  seizing  and  selling  the  part- 
ner's interest  is  not  uniform,  though  the  right  is  generally 
recoo^nized. 


"O" 


2.   Of  the  Title  to  Personal  Property. 

§  101.  May  he  held  \\\  firm  name. —  As  has  been  already 
stated,  the  title  to  personal  property  may  be  acquired,  held 
and  disposed  of  by  the  firm  in  the  firm  name,  and  this  is  the 
proper  and  appropriate  manner  in  which  the  title  to  such  prop- 
erty should  be  taken,  held  and  disposed  of.  Bills  of  sale  and 
chattel  mortgages  may  therefore  be  made  to  or  by  the  firm 
in  the  firm  name,  subject  to  the  disabilities,  hereafter  to  be 
noticed,  attaching  to  the  execution  of  instruments  under 
seal.  Glioses  in  action,  as  well  as  choses  in  possession,  may 
be  acquired  or  transferred  in  the  name  of  the  firm. 

1  Gerard  v.  Bates  (1888),  124  111.  St.  Rep.  403;  Nixon  v.  Nash  (1861), 
150,  16  N.  E.  Rep.  258,  7  Am.  St.  12  Ohio  St.  647,  80  Am.  Dec.  390; 
Rep.  350;  Williams  v.  Lewis  (1888),  Morrison  v.  Blodgett  (1836),  8  N.  H. 
115  Ind.  45, 17  N.  E.  Rep.  262,  7  Am.    238,  29  Am.  Dec.  653;  Hutchinson 

76 


SOME   INCIDENTS   OF    PAKTXEESIIIP.       [§^  102-101. 

§  102.  May  be  held  in  the  name  of  one  partner  for  the 
firm.  —  But  personal  property  may  be  firm  property  al- 
though the  title  is  taken  or  held  in  the  name  of  one  partner 
only.  It  may  have  been  so  taken  and  held  with  the  consent 
of  all  of  the  partners,  in  which  case  their  rights  to  it,  as  be- 
tween themselves,  are  clear;  but  it  may  also  have  been  so 
taken  or  held  by  one  partner  in  violation  of  his  duty  to  the 
firm,  but  in  this  case  also,  as  has  been  seen,  equity  regards 
it  as  firm  property  and  will  protect  the  rights  of  the  other 
partners  in  it, 

§  103.  Title  is  in  firm  collectively.  —  Whether,  how- 
ever, the  title  be  in  the  firm  name  or  in  that  of  one  partner 
for  the  firm,  the  ownership  of  the  property  is  not  in  the 
partners  as  individuals,  but  in  the  firm  as  such.  The  part- 
ners are  therefore,  as  has  been  seen,  neither  joint  tenants 
nor  tenants  in  common,  but  the  possessors  of  that  peculiar 
interest  already  described,  known  as  the  partner's  share. 
One  partner,  therefore,  as  has  been  already  noted,  can  neither 
sell,  assign  nor  mortgage  any  specific  chattel,  but  simply  his 
interest  in  the  whole  assets,^ 

3.  Of  the  Title  to  Real  Estate. 

%  104.  Legal  title  to  real  property  cannot  be  taken  in 
firm  name.  —  Partnership  real  estate  stands  upon  peculiar 
footing.  A  partnership  may  own  or  deal  in  lands,  but  it  is 
incapable,  as  a  partnership,  of  taking  or  holding  the  legal 
title  to  lands  in  the  firm  name,  inasmuch  as  it  is  incapable 
of  acting  to  such  an  extent  as  a  separate  legal  entity.  A 
conveyance  to  the  firm  by  name  operates,  therefore,  as  has 
))een  seen,  either  to  pass  no  title  at  all,  or  to  vest  the  legal 
title  in  those  partners  whose  individual  names  appear  in  the 
firm  name.^ 

Where,  therefore,  it  is  desired  to  convey  real  estate  to  a 

V.    Dubois    (1881),    45    Mich.    143;        i  See  on^e,  §  99. 
Whigham's  Appeal  (18G9),  63  Pa.        2  See  an^e,  §  84,  and  note. 
St.  194,  Paige's  Partn.  Cas.  103, 

77 


§§  105,  lOG,]  LAW    OF    PARTNEKSHIP. 

firm,  the  utmost  that  can  be  done  is  to  vest  the  title  in  the 
partners  as  individuals  for  the  firm ;  and  for  this  purpose 
the  most  unequivocal  method  is  to  make  the  deed  run  to 
all  of  the  partners  in  their  individual  names,  as  partners 
doing  business  under  the  firm  name  which  may  have  been 
adopted,  and  expressly  declaring  that  they  are  to  hold  it  as 
such  partners  and  for  partnership  purposes. 

§  105.  But  the  equitable  title  is  in  the  firm.  —  But 

though  the  firm  as  such  cannot,  in  the  firm  name,  hold  the 
legal  title  to  real  estate,  the  equitable  title  to  firm  realty  is 
in  the  firm,  and  equity  will  regard  and  protect  the  land  as 
partnership  property.  For  this  purpose,  the  person  or  per- 
sons holding  the  legal  title,  whether  one  partner  or  all,  will 
be  regarded  as  holding  in  trust  for  the  firm.^ 

§  106.  When  land  is  partnership  property. —  The  ques- 
tion whether  land  held  in  the  name  of  one  partner  or  of  all 
is  partnership  property  or  not,  where  there  is  no  unequivo- 
cal evidence  of  the  intention,  is  one  of  much  importance  and 
frequently  of  great  difficulty.  The  question  may  be  raised 
either  by  the  partners  themselves,  or  by  the  heirs  or  widow 
of  a  deceased  partner,  or  by  the  separate  creditors  of  the 
partner  in  whose  name  the  legal  title  may  be  vested,  claim- 
ing priority  over  the  firm  creditors. 

The  chief  criterion  by  which  the  question  is  to  be  deter- 
mined, as  is  declared  in  a  recent  case,  is  the  intention  of  the 
partners.  "  That  intention,"  said  the  court,^  "  may  be  ex- 
pressed in  the  deed  conveying  the  land,  or  in  the  articles  of 
partnership;  but  when  it  is  not  so  expressed,  the  circum- 
stances usually  relied  upon  to  determine  the  question  are 
the  ownership  of  the  funds  paid  for  the  land,  the  uses  to 

iSee  Riddle  v.  Whitehill  (1889),  1117;  Hatchett  v,  Blanton  (1882), 

135  U.  S.  621,  10  Sup.  Ct.  Rep.  924,  72  Ala.  423;  Shanks  v.  Klein  (18S1), 

34  L.  ed.  282;  Paige  v.  Paige  (1887),  104  U.  S.  18,  Paige's  Partn.  Cas.  136. 
71  Iowa,  318,  32  N.  W.  Rep.  360,        2  Robinson  Bank  v.  Miller  (1894), 

60  Am.  Rep.  799;  Harris  v.  Harris  153  111.  244,  38  N.  E.  Rep.  1078,  46 

(1891),  153  Mass.  439,  26  N.  E.  Rep.  Am.  St.  Rep.  883,  27  L.  R.  A.  449. 

78 


SOME    INCIDENTS    OF   PAKTNEKSIIIP. 


[§  lo: 


-n-hicli  it  is  put,  and  the  manner  in  which  it  is  entered  upon 
the  books  of  the  firm.*  AVhere  real  estate  is  bought  with 
partnership  funds  for  partnership  purposes,  and  is  applied 
to  partnership  uses,  or  entered  and  carried  in  the  accounts 
of  the  firm  as  a  partnership  asset,  it  is  deemed  to  be  firm 
property;  and,  in  such  case,  it  makes  no  difference,  in  a  court 
of  equity,  whether  the  title  is  vested  in  all  the  partners  as 
tenants  in  common,  or  in  one  of  them,  or  in  a  stranger.^  If 
the  real  estate  is  purchased  with  partnership  funds,  the 
party  holding  the  legal  title  will  be  regarded  as  holding  it 
subject  to  a  resulting  trust  in  favor  of  the  firm  furnishing 
the  money.  In  such  case  no  agreement  is  necessary,  and 
the  statute  of  frauds  has  no  application."  ^ 

§  107.  Same  subject. —  Where  the  land  was  purchased  in 
their  individual  capacity  by  persons  who  thereafter  became 
partners,  the  question  whether  it  has  been  converted  into 


1  Citing  here,  1  Bates  on  Part- 
nership, §  280;  2  Lindley  on  Part- 
nership, marg.  p.  649;  17  Am.  & 
Eng.  Ency.  of  Law,  945.  In  Lind- 
say V.  Race  (1894),  103  Mich.  28,  it 
is  said:  "Whether  lands  held  in 
the  name  of  one  partner  or  of  both 
are  to  be  deemed  copartnership 
property  is  generally  a  question  of 
intent,  to  be  gathered  from  the 
manner  in  which  the  members  of 
the  firm  have  dealt  with  them. 
While  the  fact  that  the  funds  of 
the  copartnership  have  been  used 
in  paying  for  the  lands,  when  origi- 
nally purchased  or  subsequently, 
is  not  conclusive  of  this  intent,  yet 
it  is  persuasive  evidence,  and  when, 
as  in  this  case,  it  is  accompanied 
by  the  entry  of  the  transaction  on 
the  firm  Ijooks  as  a  copartnership 
transaction,  under  circumstances 
which  import  a  daily  declaration 


that  it  was  so  regarded,  it  is  con- 
vincing." 

2  Citing  here,  Parsons  on  Part- 
nership (4th  ed.),  §  265;  1  Bates  on 
Partn.,  §281;  Johnson  v.  Clark,  18 
Kan.  157.  To  same  effect:  Page  v. 
Thomas  (1885).  43  Ohio  St.  38,  54 
Am.  Rep.  788;  Collner  v.  Greig 
(1890),  137  Pa.  St.  606, 21  Am.  St.  Rep. 
899 ;  Pepper  v.  Thomas  (1887),  85  Ky. 
539;  Ross  v.  Henderson  (1877),  77 
N.  C.  170;  Roberts  v.  Eldred  (1887), 
73  Cal.  394. 

3  Citing  here,  Parker  v.  Bowles,  57 
N.  H.  491;  Bates  on  Purtn,,  sujva. 
To  same  effect:  Riddle  v.  Wliitehill 
(1889),  135  U.  S.  621.  10  Sup.  Ct.  Rep. 
924,  34  L,  ed.  282;  Way  v.  Stebbins 
(1882),  47  Mich.  296,  11  N.  W.  Rep. 
166;  Paige  v.  Paige  (1887),  71  Iowa, 
318,  32  N.  W.  Rep.  360.  60  Am.  Re}). 
799;  Galbraith  v.  Tracy  (1894),  153 
111.  54.  38  N.  E.  Rep.  937,  28  L.  R.  A. 
129,  46  Am.  St.  Rep.  867. 


79 


§  107.]  LAW    OF   PARTNERSHIP. 

partnership  land  is  one  of  greater  difficulty,  and  the  authori- 
ties cannot  be  reconciled.  In  the  case'  quoted  from  in  the 
preceding  section  it  is  said :  "  The  theory  of  some  of  the 
cases  is  that  real  estate  bought  with  separate,  and  not  part- 
nership, funds  cannot  be  converted  into  firm  property  by  a 
verbal  agreement  between  the  partners,  because  no  trust  can 
be  created  in  lands  unless  by  writing,  in  view  of  the  statute 
of  frauds,  except  such  as  results  by  implication  of  law.^ 
There  are  cases  which  hold  that,  even  though  the  land  was 
originally  bought  by  the  several  partners  with  their  individ- 
ual funds,  and  deeded  to  them  as  tenants  in  common,  yet  it 
will  be  regarded  in  equity  as  firm  property  where  it  is  im- 
proved out  of  partnership  funds  for  firm  purposes,  and  act- 
ually used  for  such  purposes,  or  where  the  firm  puts  valuable 
and  permanent  improvements  upon  it  for  firm  purposes, 
and  w^hich  are  essential  to  the  firm.  In  some  instances  the 
land  is  held  to  be  the  property  of  the  partners,  and  the  im- 
provements to  be  the  property  of  the  firm.* 

"The  use  of  the  property  is  not  conclusive  of  its  character 
as  real  estate  or  personalty,  but  is  only  evidence  of  the  in- 
tention of  the  parties.  When  the  intention  of  the  partners 
to  convert  the  land  into  firm  property  is  inferred  from  cir- 
cumstances, the  circumstances  must  be  such  as  do  not  admit 
of  any  other  equally  reasonable  and  satisfactory  explana- 
tion.^ And  where  it  is  sought  to  show  a  conversion  of  the 
land  into  personalty  by  agreement  of  the  partners,  such 
agreement  must  be  clear  and  explicit."* 

1  Robinson  Bank  v.  Miller  (1894),  Bank  v.  National  Mechanics'  Bank 
153  IlL  244.  38  N.  E.  Rep.  1078,  46  (1895),  80  Md.  371,  80  Atl.  Rep.  913, 
Am.  St.  Rep.  S83,  27  L.  R.  A.  449.  37  L.  R.  A.  449,  45  Am.  St.  Rep.  350, 

2  Citing  here,  Parker  v.  Bowles  it  is  said  that  where  the  land  was 
(1876),  57  N.  H.  491.  originally  owned  by  the  partners 

3  Citing  1  Bates  on  Partnership,  as  individuals,  and  so  stands  upon 
gg  281,  283,  385.  the  public  records,  something  more 

*  Citing  Parsons  on  Partnership,  than  the  mere  intent  of  the  part- 
§  867.  ners  or  the  entries  upon  their  own 

*  Citing  17  Am.  &  Eng.  Ency.  books  is  necessary  to  convert  the 
of  Law,  9j4.     In  National  Union  property    into    firm    property    as 

80 


SOME    L\Oir)i:XTS    OF    I'AKTNKKSIJIP.        [§§  lOS,  lO'.*. 


§  108.  Nature  of  partner's  interest  in  partnershij) 
realty. —  The  interest  of  each  partner  in  the  partnership  real 
estate,  like  his  interest  in  the  partnership  pereonal  property, 
is  not  a  title  to  any  specific  parcel  or  to  any  specific  portion, 
but  simply  an  interest  in  the  residue  after  the  partnership 
debts  have  been  paid  and  its  affairs  are  wound  up.^  Until 
that  purpose  is  accomplished,  therefore,  he  can  sell,  assign 
or  mortgage  no  greater  interest,  nor  can  more  l)e  taken  upon 
process  against  him  at  the  suit  of  his  individual  creditors. 

§  109.  Partnership  realty,  when  deemed  personal  es- 
tate.—  The  English  rule  regards  partnership  realty  as  part- 
nership capital  and  as  having  in  all  respects  the  character 
of  personal  property ;  but  the  American  rule  is  otherwise. 
In  this  country  the  partnership  realty  retains  its  character 
as  such  for  most  purposes,  though  the  firm  may  deal  with  it 
as  personal  estate,'-  and  equity  will  regard  it  as  personalty 

against  individual  creditors.  Com- 
pare Goldthwaite  v.  Janney  (1894), 
103  Ala.  431,  15  So.  Rep.  5G0,  28  L. 
R.  A.  16;  Alkire  v.  Kahle  (1888), 
133  111.  496,  17  N.  K  Rep.  693,  5  Am. 
St.  Rep.  540. 

1  See  Du  Bree  v.  Albert  (1882),  100 
Pa.  St.  483;  Henry  v.  Anderson 
(1881),  77  Ind.  361;  Kruschke  v. 
Stefan  (1892),  83  Wis.  373. 

2  Thus,  in  Woodward-Holmes  Co. 
V.  Nudd  (1894),  58  Mmn.  236,  59  N. 
W.  Rep.  1010.  27  L.  R.  A.  340,  it  is 
said:  "During  the  continuance  of 
the  partnership  the  partners  can 
convey  or  mortgage  it,  in  the 
course  of  their  business,  whenever 
they  see  fit,  veithout  their  wives 
joining  in  the  conveyance  or  mort- 
gage, and  the  wives  would  have  no 
dower  or  other  interest  in  it  This 
is  one  of  the  very  objet^ts  of  treat- 
ing partnership  real  estate  an  per- 
sonal property;  for  otlierwise  tlie 
business    of    t)ie    fJrni    might    be 

6  81 


stopped,  and  the  partners  unable 
to  realize  on  tlie  assets  of  the  firm, 
by  reason  of  the  wife  of  one  of 
them  refusing  to  join  in  the  con- 
veyance or  mortgage.  They  have 
the  same  jsower  of  di-sposition  over 
it  for  the  purposes  of  a  dissolution 
of  the  partnership,  the  payment  of 
its  debts,  and  the  distribution  or 
division  of  the  capital  among  them- 
selves; for  until  that  is  done  the 
proi^erty  has  not  fulfilled  its  func- 
tions as  personalty,  or  ceased  to  be 
partnership  property."  So  in  Ro- 
velsky  v.  Brown  (1891),  92  Ala.  022, 
9  So.  Rep.  182,  25  A)n.  St.  Rep.  83, 
it  is  held  tliat  one  member  of  a 
firm,  engaged  in  tlie  business  of 
buying  and  selling  real  estate,  can 
bind  the  firm  by  a  contract  in  the 
firm  name  for  tlie  sale  of  partner- 
ship hind,  and  that  such  contract 
will  bespecilit  ally  enforced  against 
all  tlie  partners. 


§§  110,  111,]  LAW    OF    PARTNEKSHIP. 

for  tlie  purpose  of  paying  the  debts  and  settling  the  partner- 
ship affairs  to  the  exclusion  of  heirs,  widow  or  the  creditors 
of  the  individual  partners.^  As  soon  as  that  purpose  is  ac- 
complished, however,  the  realty  resumes  its  character  as 
such.  It  therefore  descends  to  the  heir  of  a  deceased  part- 
ner, though  charged  with  the  trust  in  favor  of  the  partner- 
ship ;  2  and  the  widow  of  a  deceased  partner  may  have  dower 
in  it*  after  the  firm  debts  are  paid. 

§  110.  Bona  fide  purchaser  from  partner  having  legal 
title. —  Partnership  lands,  therefore,  when  found  to  be  such, 
are  liable  to  the  partnership  creditors,  and  the  latter  take 
precedence  over  the  creditors  of  an  individual  partner  in 
whose  name  the  legal  title  stands,  and  over  a  transfer  by 
such  partner  of  the  legal  title  to  any  one  not  a  honajide  pur- 
chaser. But  a  honajide  purchaser  or  mortgagee  of  partner- 
ship lands,  in  ignorance  that  they  were  such,  from  the  part- 
ner having  the  legal  title  of  record,  will  be  protected  as 
against  both  the  other  partners  and  creditors.* 

§  111.  Interest  of  surviving  partner  in  firm  realty. — 

Upon  the  dissolution  of  the  partnership  by  death,  the  entire 
legal  title  to  all  the  partnership  personalty  vests,  as  will  be 

iSee    Robinson   Bank  v.   Miller  210;  Strong  v.  Lord  (1883),  107  111. 

(1894),  153  111.  244,  38  N.  E.  Rep.  1078,  25. 

46  Am.  St.  Rep.  883,  27  L.  R.  A.  449;  <  Norwalk  Nat.  Bank  v.  Sawyer 
Paige  V.  Paige  (1887),  71  Iowa,  818,  (1882),  38  Ohio  St.  338:  McNeil  v. 
32  N.W.Rep.  360,  60  Am.  Rep.  799;  Congregational  Society  (1884),  66 
Mallory  v.  Russell  (1887),  71  Iowa,  Cal.  105;  Seeley  v.  Michell  (1887), 
€3,  60  Am.  Rep.  776;  Willet  v.  85  Ky.  508,  4  S.  W.  Rep.  190;  Tar- 
Brown  (1877),  65  Mo.  138,  54  Am.  bell  v.  West  (1881),  86  N.  Y.  287; 
Eep.  265;  Fairchild  v.  Fairchild  Kepler  v.  Savings  &  Loan  Co. 
(1876),  64  N.  Y.  471.  (1882),  101  Pa.  St.  602.     See,  also, 

2  Martin  v.  Morris  (1885),  62  Wis.  National  Union  Bank  v.  National 
418,  22  N.  W.  Rep.  525;  Galbraith  Mechanics' Bank  (1895),  80  Md.  371, 
V.  Tracy  (1894),  153  111.  54,  38  N.  E.  30  Atl.  Rep.  913,  27  L.  R.  A.  449,  45 
Hep.  937,  46  Am.  St.  Rep.  867,  28  L.  Am.  St.  Rep.  350;  Goldthwaite  v. 
K.  A.  129.  Janney  (1894),  102  Ala.  431,  15  So. 

3  Brewer  v.  Browne  (1880),  68  Ala.  Rep.  560,  28  L.  R.  A.  16. 

82 


SOME    INCIDENTS    OF    PARTNERSHIP.  [§  111. 

seen  hereafter,'  in  the  survivor.  "With  respect  of  the  part- 
nership realty,  however,  a  somewhat  different  rule  prevails. 
The  real  estate,  though  treated  as  personalty  in  the  United 
States  for  many  purposes,  retains  its  character  as  realty  so 
far  as  the  exigencies  of  the  partnership  affairs  will  permit. 
The  legal  title  to  it  —  unless  it  had  been  vested  for  the  firm 
in  the  name  of  one  partner  only  who  chances  to  be  the  sur- 
vivor —  descends,  as  has  been  seen,^  to  the  heirs  subject  to 
the  partnership  needs,  but  the  equitable  title  vests  in  the  sur- 
viving partner  for  the  purpose  of  paying  the  firm  debts  and 
settling  up  the  partnership  affairs  in  substantially  the  same 
manner  that  the  legal  title  to  the  personal  assets  vests  in 
him.  As  such  survivor  he  may,  therefore,  convey,  when  nec- 
essary, the  equitable  title  to  part  or  all  of  the  partnership 
realty,  and  the  court  will  then  require  the  heirs  or  other 
holders  of  the  legal  title  to  convey  that  legal  title  to  the 
person  who  has  purchased  the  equitable  title  from  the  sur- 
viving partner.* 

1  See  post,  %  368.  123  Ind.  399,  7  L.  R.  A.  481 ;  Tilling- 

-'See  ante,  %  109.  hast  v.  Champlin  (1856),  4  R.  I.  173, 

3  See  Shanks  v.  Klein  (1881),  104    67  Am.  Dec.  510;  Buffum  v.  Buffum 

U.  S.  18,  36  L.  ed.  635,  Paige's  Partn.    (1861),  49  Me.  108,  77  Am.  Dec.  249. 

Cas.  136;  Walling  v.  Burgess  (1889), 

83 


CHAPTER  YII. 


OF  THE  RIGHTS  AND  DUTIES  OF  PARTNERS  TOWARDS  EACH 

OTHER. 


§  112.  Duty  of  partners  to  exercise 
good  faith. 

113.  Duty  not  to  carry  on  com- 

peting business. 

114.  Duty  to  exercise  care  and 

skill. 

115.  Duty  to  conform  to  partner- 

ship agreement. 

116.  Duty  to  keep  accounts. 

117.  Duty  to  consult  with  each 

other. 

118.  Right  of  each  to  participate 

in  business. 
119, 120.  Right  of  partner  to  ex- 
tra compensation. 


§  12L  Right  of  partner  to  interest 
on  advances. 

122.  Right  to  have  partnership 

property  applied  to  pay- 
ment of  partnership  debts. 

123.  — —  One  partner  cannot  ap- 

ply partnership  property 
to  his  own  uses. 

124.  Claims  of  partnership 

creditors    based    on    this 
right  of  partners. 

125-127.  Right    to    contribution 
and  indemnity. 


§  112.  Duty  to  exercise  good  faith.— The  relation  of 
partners  to  each  other  is  one  of  great  confidence  and  trust, 
and  the  law  demands  from  them  the  exercise  of  the  highest 
integrity  and  good  faith  toward  each  other.  Each  one  is 
bound  to  use  the  partnership  property  and  exercise  his  part- 
nership powers  for  the  benefit  of  the  firm  and  not  for  him- 
self alone.  Profits  made  in  the  course  of  the  partnership 
belong  to  the  firm,  and  one  partner  will  not  be  permitted 
to  make  gain  for  himself  at  the  expense  of  the  firm.  Secret 
commissions  made  by  one  partner  upon  partnership  dealings 
must  be  accounted  for  to  the  firm,  and  if  one  partner  takes 
advantage  of  his  position  to  acquire  for  himself  that  which 
ought  to  be  acquired  for  the  firm,  he  will  be  required  to 
transfer  it  to  the  firm.  So  one  partner  will  not  be  permitted, 
either  directly  or  indirectly,  to  buy  of  or  for  himself  or  to 
sell  to  or  for  himself  on  the  partnership  account,  without 

84 


KIGHTS   AND    DUTIES    OF    PAKTNERS. 


[§  li- 


the knowledge  and  consent  of  the  other  partners;  and  in 
their  dealings  with  each  other,  in  relation  to  partnership 
matters,  each  is  required  to  make  a  full  disclosure  of  all 
facts  within  his  knowledge  affecting  the  transaction.  This 
dut}"  of  good  faith  is  intensified  when  one  partner  is  conduct- 
ing the  business  alone  as  managing  partner.^ 

§  113.  Duty  not  to  carry  on  other  business  to  prejudice 
of  flrni, —  Partners  may  agree  in  their  articles  or  otherwise 
that  one  or  more  partners  may  carry  on  other  business,  or 
be  relieved  in  whole  or  in  part  from  giving  their  time  and 
efforts  to  the  firm  business;  but  in  the  absence  of  such  an 
agreement,  a  partner  has  no  right  to  give  his  time,  skill  or 
capital  to  another  business  or  firm  to  the  prejudice  of  his 
partners.     If  he  clandestinely  carries  on  the  same  business 


1  See  Brooks  v.  Martin  (1863),  2 
Wall.  (U.  S.)  70,  and  Kimberley  v. 
Arms  (1888),  129  U.  S.  512,  as  to  the 
duties  of  a  managing  partner.  See, 
also,  Trego  v.  Hunt  (1896),  Ap.  Cas.  7. 

See  Hodge  v.  Twitchell  (1885),  33 
Minn.  389,  23  N.  W.  Rep.  547,  and 
Newell  V.  Cochran  (1889),  41  Minn. 
374,  43  N.  W.  Rep.  84.  as  to  secret 
commissions  made  by  one  partner; 
Caldwell  v.  Davis  (1887),  10  Colo. 
481,  3  Am,  St.  Rep.  599,  as  to  the 
duty  to  make  full  disclosure  in 
dealings  with  each  other;  John- 
son's Appeal  (1886),  115  Pa.  St.  129, 
2  Am.  St.  Rep.  539,  and  Mitchell  v. 
Reed  (1874),  61  N.  Y.  123.  19  Am. 
Rep.  252,  that  if  one  partner  takes 
a  renewal  in  his  own  name  of  an 
existing  lease  to  the  firm,  it  inures 
to  the  benefit  of  the  firm.  This 
seems  to  be  true  even  after  a  disso- 
lution of  the  firm,  because  the 
chance  of  renewal  is  a  firm  asset. 
See,  also,  to  the  effect  that  one 
partner  who  buys  up  a  claim 
against  the    firm    at   a    discount 


must  give  the  firm  the  benefit: 
Easton  v.  Strother  (1881),  57  Iowa, 
506;  that  one  who  buys  in  property 
belonging  to  the  firm,  as  upon  a 
sale  on  execution,  must  hold  for 
the  firm:  Railsback  v.  Love  joy 
(1886),  116  III.  442;  Roby  v.  Cole- 
hour  (1890),  135  111.  300;  that  insur- 
ance of  firm  property,  taken  in  the 
name  of  one  partner,  inures  to  the 
firm:  Tebbetts  v.  Dearborn,  74  Me. 
392;  that  one  partner  cannot  apply 
firm  property  to  his  own  uses: 
Morrison  v.  Blodgett  (1836),  8  N. 
H.  238,  29  Am.  Deo.  653;  tiiat  one 
partner  cannot  through  a  third 
person  secretly  imrchase  firm  assets 
.sold  on  dissolution:  Jones  v.  Dex- 
ter (1881),  130  Mass.  380,  39  Am. 
Rep.  459,  and  note;  that  one  part- 
ner cannot  avail  himself  of  infor- 
mation accjuired  as  a  jjartner  to 
aid  him  in  carrying  on  anotiier 
business  in  coinpctitioii  with  the 
firm:  Aas  v.  Benham  (1.S91).  2  Cli. 
244;  Latta  v.  Kill)()urn  (1893),  150 
U.  S.  524,  37  L.  ed.  1169. 


§§  114,  115.]  LAW    OF    PARTNERSHIP. 

as  that  of  the  firm  and  in  competition  with  it,  he  may  be 
compelled  to  account  to  the  firm  for  the  profits  which  he 
makes,^  but  he  will  not  be  compelled  to  account  if  the  busi- 
ness is  a  different  and  non-competing  one.^ 

"  If  a  member  enter  into  a  transaction  in  his  own  behalf, 
which  is  within  the  scope  of  the  partnership  business,"  said  the 
court  in  one  case,  "  his  copartner  may  insist  that  it  is  a  fraud 
upon  him  and  claim  the  benefit  resulting  from  it ;  yet  this  is  a 
right  which  the  partner  can  alone  assert,  and  it  is  not  avail- 
able to  third  persons  for  the  purpose  of  fixing  a  liability 
upon  the  partnership  when  such  claim  has  not  been  as- 
serted." ^ 

§  114.  Duty  to  exercise  care  and  skill. —  It  is  the  duty 
of  each  partner,  and  he  impliedly  if  not  expressly  agrees,  to 
transact  the  business  of  the  firm  with  reasonable  care,  skill, 
diligence  and  econom}^;  and  if  the  firm  sustains  injury  by 
reason  of  his  failure  to  do  so,  he  must  bear  the  loss,*  though 
he  Avill  not  be  liable  for  a  loss  caused  by  honest  mistake  or 
error  of  judgment  not  amounting  to  gross  negligence  or  ig- 
norance.^ 

§  115.  Duty  to  conform  to  partnersliip  agreements. — 

It  is  also  the  duty  of  each  partner  to  conform  to  all  of  the 
agreements,  regulations  and  restrictions  imposed  by  the  part- 
nership articles,  and  to  confine  his  acts  within  the  scope  and 
limits  fixed  for  the  partnership  business.  If,  by  reason  of 
his  breach  of  duty  in  these  respects,  a  loss  happens  to  his 
partners,  he  must  indemnify  them. 

1  See  Goldsmith  v.  Eichold  (1891),  *  Yetzer  v.  Applegate  (1891),  83 

94  Ala.  116,  33  Am.   St.  Rep.  97;  Iowa,  736,  50  N.  W.  Rep.  66. 

Todd  V.  Rafferty  (1878),  30  N.  J.  Eq.  e  Charlton  v.  Sloan  (1888),  76  Iowa, 

254.  288,  41  N.  W.  Rep.  303.     One  part- 

-  Aas  V.  Benham  (1891),  2Ch.  244;  ner  cannot  hold  the  other  liable 

Latta  V.  Kil bourn  (1893),  150  U.  S.  when  both  ha%'e  been  equally  neg- 

524,37L.ed.  1169;  Metcalfe  v.  Brad-  ligent.     Insley  v.  Shire   (1895),  54 

Shaw   (1893),  145  111.  124,  33  N.  E.  Kan.  793,  39  Pac.  Rep.  713,  45  Am. 

Rep.  1116,  36  Am.  St.  Rep.  478.  St.  Rep.  308. 

3  Lockwood  V.  Beckwith  (1858),  6 
Mich.  168. 


EIGHTS    AND    DUTIES    OF    PARTXEKS.       [§§lir>,  117. 

Thus,  where  the  partners  expressly  agreed  that  no  one  of 
them  should  sign,  accept  or  indorse  negotiable  ]?aper  except 
for  their  own  legitimate  purposes,  and  one  of  them  used  the 
lirm  name  for  the  accommodation  of  a  third  person  in  such 
a  way  that  the  firm  was  held  liable,  the  offending  partner 
was  compelled  to  make  good  the  loss  to  his  partners.^  And 
where  one  partner  who  had  stipulated  to  render  certain  serv- 
ices for  the  firm  refused  without  reasonable  cause  to  do  so, 
it  was  held  that  he  was  answerable  to  liis  partners  for  the 
value  of  the  services.^ 

§  116.  Duty  of  partners  to  keep  accounts. —  It  is  the 

right  of  every  partner  to  have  true  and  proper  accounts  kept 
of  the  partnership  transactions,  and  to  have  these  accounts, 
at  all  reasonable  times,  open  to  his  inspection  at  the  place 
of  business.  The  general  duty  of  keeping  the  accounts  may, 
by  the  articles,  be  devolved  upon  one  partner,  or  upon  a 
clerk ;  but  even  in  such  a  case,  as  well  as  when  there  is  no 
agreement,  it  is  the  duty  of  each  partner  to  make  and  keep, 
or  enable  such  partner  or  clerk  to  keep,  correct  accounts  of 
his  transactions.  Where  a  partner  fails  in  his  duty  in  this 
regard,  every  reasonable  presumption  will  be  made  against 
him  upon  the  final  accounting.^ 

§  117.  Duty  to  consult  with  each  other. —  In  every  im- 
portant exigency  in  the  partnership  affairs,  wliere  one  part- 
ner is  about  to  act,  he  should  consult  with  his  partners  un- 
less the  circumstances  are  such  as  to  prevent  or  excuse  him 
from  so  doing.  Thus,  where  one  partner,  without  consulting 
his  copartner —  whose  knowledge  of  the  subject  would  have 
rendered  the  })urciiase  unnecessary  —  bouglit  in  l'i»i'  a  lai'ge 

•Murphy  v.  Crafts  (1 808),  13  La.  Clagott  (1877),  48  Md.  22:]:  Fiorcv 

Ann.  519,  71  Am.  Doc;.  r,l<i.  v.  Scott  (1801),  37  Ark.  308:  Ponu'- 

-'Marsh's  Appeal  (1871),  0!i  Pa.  St.  roy   v.    Bonton   (1882),  77   Mo.   (11: 

30,  8  Am.  Rep.  200.  Diamond   v.   Henilerson  (187!)),  17 

3  See  Kelly  v.  Ci reenleaf  (1843),  3  V/is.  172;  Knapp  v.  Edwarcla  (1883), 

Story  (U.  S.  C.  C),  105;  Webb  v.  57  Wis.  191. 
Fordyce  (1880),  55  Iowa,  11;  Hail  v. 

87 


§§  lis,  110,]  LAW    OF    PARTNERSHIP. 

sum  an  apparent  but  really  unfounded  claim  against  the  ffim 
real  estate,  it  was  held  that  his  act  was  gross  negligence  and 
that  he  could  not  require  his  copartner  to  contribute  to  the 
expense  of  the  purchase.^ 

§  118.  Eight  of  each  partner  to  share  in  management 
of  the  bnsiness. —  Unless  the}^  have  agreed  otherwise,  it  is 
the  right  of  each  partner  to  take  an  equal  part  in  the  trans- 
action of  the  firm's  business.  Each  has  an  equal  right  to 
information  about  its  business  and  projects,  to  have  free  ac- 
cess to  its  books  and  accounts,  and  to  participate  generally 
in  the  conduct  of  its  affairs.  "  Although  one  may  have  an 
interest  only  in  the  profits  and  not  in  the  capital,"  said  the 
court  in  one  case,-  his  right  to  participation  is  the  same  be- 
cause "  his  rights  are  involved  in  the  proper  conduct  of  the 
affairs  of  the  firm,  so  that  profits  may  be  made." 

§119.  Right  of  partner  to  extra  compensation.— In 

the  absence  of  special  agreement,  a  partner  is  not  entitled 
to  compensation  for  his  services  for  the  partnership,  but 
must  be  content  with  his  share  of  the  profits,  if  any.^  It 
makes  no  difference  that  his  services  are  more  valuable  than 
those  of  any  other  partner,  or  that  he  performs  a  greater 
portion  of  the  duties  than  any  other.^  Nor  does  the  fact 
that  one  partner  is  disabled  by  sickness  from  rendering  any. 
service  give  another  partner,  who  performs  it  all,  a  claim 
for  compensation,  for  such  sickness  is  one  of  the  risks  inci- 
dent to  the  relation.^  Even  where  one  partner  winds  up 
the  business  of  the  firm,  he  is  not  ordinarily  entitled  to  extra 
compensation ;  ^  though  he  has  been  held  to  be  entitled  to  it 

1  Yorks  V.  Tozer  (1894),  59  Minn.     Peacock  (1884),  109  111.94;  Redfield 
78,  60  N.  W.  Rep.  846,  28  L.  R.  A.  86.     v.  Gleason  (1888),  61  Vt.  220,  15  Am. 

2  Katz  V.  Brewington  (1889),  71     St.  Rep.  889. 

Mel.  79,  20  Atl.  Rep.  139.  4  Burgess  v.  Badger  (1888),  124  111. 

3  Major  V.  Todd  (1890),  84  Mich.  85,    288. 

47  N.  W.  Rep.  841 ;  Godfrey  v.  White        ^  Heath  v.  Waters  (1879),  40  Mich. 
(1880),  43  Mich.  171,  5  N.  W.  Rep.     457. 

243;  Hyre  v.  Lambert  (1892),  37  W.        6  Barry  v.  Jones  (1872),  11  Heisk. 
Va.  26,  16  S.  E.  Rep.  446;  Ligare  v.     (Tenn.)  206,  27  Am.  Rep.  742. 

88 


EIGHTS    AND    DUTIES    OF    PARTNERS. 


[§  120. 


Avhere,  after  dissolution  by  death,  he  carries  on  the  business 
successfully  with  the  consent  of  those  interested,  until  it 
could  be  wound  up.^ 

If  one  partner  is  thu3  ordinarily  not  entitled  to  extra  com- 
pensation for  his  services,  it  is  all  the  more  clear  that  he 
will  not  be  so  entitled  where  he  has  wrongfully  excluded  his 
partner  from  participation  in  the  business.' 

§  120.  Same  subject  —  May  bo  ai^reemeiit  to  pay  it. — 

But  there  may  be  an  agreement  to  pay  a  partner  for  his 
services  as  such,  and  this  agreement  may  be  express  or  im- 
])lied.  "  Where  it  can  bo  fairly  and  justly  implied,"  said 
the  court  in  one  case,^  "  from  the  course  of  dealing  between 
the  partners,  or  from  circumstances  of  equivalent  force,  that 
one  partner  is  to  be  compensated  for  his  services,  his  claim 
will  be  sustained."  It  has  been  so  implied,  for  example, 
where  one  partner  gave  his  whole  time  to  strangers  for  a 
salary  which  he  retained,  leaving  the  claimant  partner  to 
manage  the  firm  business  alone.'*  It  has  been  implied  also 
from  the  acquiescence  and  course  of  dealing  of  the  part- 
ners.'* 

Where  one  partner  is  expressly  to  be  paid  in  considera- 
tion of  extra  services,  he  will  not  be  entitled  to  pay  if  such 
services  are  not  rendered,  oven  though  he  was  disabled  by 
illness.^ 


1  Robinson  v.  Simmons  (1888),  14G 
Mass.  167,  15  N.  E.  Rep.  5.J8,  4  Am. 
St.  Rep.  299;  Zell's  Appeal  (1889), 
126  Pa.  St.  742. 

-  Hannaraan  v.  Karrick  (1893), 
9  Utah,  330,  33  Pac.  Rep.  1039. 

•<  Emerson  v.  Durand  (1885),  04 
Wis.  Ill,  54  Am.  Rep.  593. 

4  Emerson  v.  Durund  (1885),  04 
Wis.  Ill,  54  Am.  R<,'p.  593;  Morris 
V.  Griffin  (1891),  83  Iowa,  327,  49  N. 
W.  Rep.  840.  See,  also.  Askew  v. 
Springer  (1884),  HI  111.  002;  Weeks 


V.  McClintock  (1887),  50  Ark.  193; 
Lassiter  v.  Jackman  (1882),  88  Ind. 
118. 

»  Winchester  v.  Glazier  (18C0),  153 
Mass.  310,  25  N.  E.  Rep.  738,  9  L.  R. 
A.  424,  As  to  validity  of  subss- 
(juent  promise  to  pay  in  considera- 
tion of  past  extra  services,  see' 
Gray  v.  Ilamil  (1889),  82  Ga.  37.-), 
0  L.  R.  A.  72. 

c Kinney    v.    Jlalier    (l.S92j,    150 
Mass.  252,  30  N.  E.  Rep.  818. 


80 


§§  121-123.]  LAW    OF   PARTNEESHIP. 

§  121.  Rig'Iit  of  partner  to  interest  on  money  advanced. 

A  partner  who  advances  money  for  partnership  purposes  is 
usually  held  to  be  not  entitled  to  interest  upon  it,  unless 
there  has  been  an  agreement  express  or  implied  to  pay  in- 
terest, though  by  some  authorities  it  is  allowed,^  Mercan- 
tile usage,  however,  and  the  course  of  dealing  between  the 
partners  may  be  suiJicient  to  sustain  an  implication  of  a 
promise  to  pay  interest.  "  Slight  circumstances,''  said  the 
court  in  one  case,^  "  may  be  sufficient  to  show  such  an  un- 
dertaking." 

§  122.  Right  of  partners  to  have  partnership  property 
applied  to  partnership  debts. —  It  is  the  right  of  each  part- 
ner to  have  the  partnership  property  applied  to  the  payment 
of  the  partnership  debts,  and  for  the  enforcement  and  pro- 
tection of  this  right  he  is  often  said  to  have  a  lien  upon  or 
equity  in  the  property. 

Whether  the  right  or  equity  of  the  partners  is  strictly  to 
be  deemed  a  lien,  as  it  is  so  often  called,  is  perhaps  open  to 
question,  though  the  name  cannot  be  regarded  as  of  great 
importance  Avhile  the  right  itself,  by  whatever  name  it  may 
be  called,  is  clearly  settled  both  in  reason  and  authority.* 

Out  of  this  right  grow  two  rules  of  much  importance: 

§  123.  Partner  cannot  apply  partnership  property 

to  his  own  nses. —  First.  One  partner  cannot,  without  the 
consent  of  the  other,  apply  the  partnership  property  to  his 
own  uses  or  to  his  own  debts,  and  of  this  the  parties  w^ho 
deal  with  him  must  take  notice  at  their  peril. 

One  partner,  therefore,  without  the  express  or  implied 
consent  of  his  copartners,  cannot  pledge,  mortgage  or  assign 
partnership  property  in  security  or  payment  of  his  own 
debts;  he  cannot  apply  partnership  funds  in  satisfaction  of 
his  ow^n  obligations;  he  cannot  use  the  firm's  name  or  credit 

1  See  Prentice  v.  Elliott  (1883),  72        2  Winchester  v.  Glazier  (1890),  153 
Ga.  154;  Baker  v.  Mayo  (1880),  129    Mass.  316,  25  N.  E.  Rep.  728,  9  L.  R. 
Mass.  517;  Whitcomb  v.  Converse    A.  424. 
(1875),  119  Mass.  38,  20  Am.  Rep.  311.        3  See  post,  ch.  XVIII. 

90 


EIGHTS    AND   DI'TIES    OF    PARTNERS.  [§  124r. 

on  his  private  account ;  he  cannot  set  off  a  private  account 
against  a  debt  due  the  firm :  in  all  these  and  similar  cases 
the  firm  is  not  bound,  and  the  firm's  property,  funds  or  cred- 
its may  be  recovered  unless  the  other  party  is  in  a  situation 
to  claim  the  protection  afforded  to  a  hona  fide  holder  for 
value  and  without  notice.^ 

The  right  of  one  partner  to  make  such  an  application  of 
the  partnership  assets  with  the  previous  consent  or  subse- 
quent ratification  of  the  other  partners  is  clear  enough, 
Avhere  the  claims  of  the  partnership  creditors  are  not 
thereby  impaired.  Whether  it  can  be  done  with  such  con- 
sent at  the  expense  of  the  partnership  creditors  depends 
upon  other  considerations,  similar  to  those  involved  in  the 
following  section,  and  hereafter  more  fully  to  be  examined. 

§  124.  Claims  of  partnership  creditors  l)ased  on 

rights  of  partners. —  Secondly.  Upon  dissolution  of  the 
partnership  and  a  division  of  its  assets  by  the  court,  this 
right  will  be  enforced,  based  upon  the  presumption  that  such 
is  the  wish  of  each  partner,  and  the  partnership  creditors 
will  be  given  a  preference  in  the  partnership  assets  over  the 
individual  creditors  of  the  partners.  The  rule  is  sometimes 
stated,  as  will  be  more  fully  seen  hereafter,-'  that  the  part- 
nership creditors  have  a  lien  upon,  and  an  absolute  right  to 
priority  of  payment  out  of,  the  partnership  property ;  but 
the  weight  of  modern  authority  is  to  the  effect  that  their 
rights  are  based  upon  this  right  of  each  partner  to  have  the 
firm  property  applied  to  the  partnership  debts.^    As  is  said 

1  See  Davies  v.  Atkinson  (1888),  N.  E.  Rep.  77G;  Rogers  v.  Betterton 

124  111.  474,  16  N.  E.  Rep.  899,  7  Am.  (1894),  93  Tonn.  G:JO,  27  S.  W.  Rep. 

St.  Rep.  373  and  note;  Cannon  v.  1017;    Coweu     v.    Hardware     Co. 

Lindsay   (1887),  85  Ala.   198,  3  So.  (1892),  95  Ala.  324.  11  So.  Rep.  195. 

Rep.  076,  7  Am.  St.  Rep.  38;  Jan-  ^Seepos^  ch.  XVllI. 

ney  v.  Springer  (1889),  78  Iowa,  617,  3See  Winslow  v.  Wallace  (1888), 

43  N.  W.  Rep.  401,  16  Am.  St.  Rep.  116  Ind.   324,   17   N.  E.   Rep.  923; 

460;  Far  well  V.  St.  Paul  Trust  Co.  Purple    v.   Farrington    (1889),   119 

(1891),  45  Minn.  495,  48  N.  W,  Rep.  Ind.    101,  4  L.  R.  A.  535,  21  N.  K. 

326,22  Am.  St.  Rep.  742;  Bruckett  Rop.  513;  Ellison   v.  Lucas   (1H91), 

V.  Downs  (1895),   163  Mass.  70,  39  87  Ga.  224,  27  Aui.  St.  Rep.  242,  lU 

91 


§  125.]  LAW    or   PARTNERSHIP. 

in  one  case:  "The  rale  that  obtains  in  the  distribution  of 
the  estates  of  partners,  and  under  which  partnership  cred- 
itors are  entitled  to  priority  of  payment  out  of  the  part- 
nership assets,  is  an  equitable  doctrine,  for  the  benefit  and 
protection  of  the  partners  respectively.  Partnership  cred- 
itors have  no  lien  upon  partnership  property.  Their  right 
to  priority  of  payment  out  of  the  partnership  assets  over 
the  individual  creditors  is  always  worked  out  through  the 
lien  of  the  partners." 

§  125.  Partner's  right  to  contribution  and  indemnity 
from  copartners.-— As  will  be  seen  bereafter,i  the  obliga- 
tion of  those  debts  and  liabilities  which  are  binding  upon 
the  firm  is  the  joint  obligation  of  all  the  partners  and  not 
the  several  obligation  of  any  of  them ;  they  should  therefore 
be  borne  by  all  the  partners  and  not  by  one  alone.  It  re- 
sults, then,  that  if  one  partner  pays  or  is  compelled  to  bear 
more  than  his  just  share  of  such  debts  and  liabilities,  he  is 
entitled  to  demand  that  his  copartners  shall,  for  his  relief, 
contribute  their  due  proportion  thereof.^ 

So  if,  in  the  conduct  of  the  partnership  affairs,  one  part- 
ner is  called  upon  to  advance  money  for  partnership  pur- 
poses, or  fairly  and  in  good  faith  incurs  an  obligation  on  the 
firm  account,  he  is  entitled  to  reimbursement  from  the  firm 
for  his  outlay,  and  to  be  indemnified  by  the  firm  against 
such  obligation.^ 

The  partner's  right  to  reimbursement  or  indemnity,  how- 
ever, will  not  arise  if  the  demand,  with  respect  of  which  he 
claims  it,  was  one  which  by  agreement  he  was  to  bear  alone, 

S.  E.  Rep.  443;  Reyburn  v.  Mitch-  Rep,  312;    Carver  Machine  Co.  v. 

ell  (1891),  106  Mo.  365,  37  Am.  St.  Bannon  (1887),  85  Tenn,  713,  4  Am. 

Rep.  350,  16  S.  W.  Rep.  593;  Gold-  St.  Rep.  803,  4  S.  W.  Rep.  331. 

smith  V.  Eichold  Bros.  (1891),  94  i  See  post,  §  209. 

Ala.  116,  33  Am.  St.  Rep.  97,  10  So.  3  See  Forbes  v.  Webster  (1839),  3 

Rep.  80;  Arnold  v. Hagerman  (1888),  Vt.  58;  Lyons  v.  Murray  (1888),  C5 

45  N.  J.  Eq.  186,  14  Am.  St.  Rep.  Mo.  83,  8  S,  W.  Rep.  170,  6  Am.  St. 

713,  17  Atl.  Rep.  93;    Hundley  v.  Rep.  17. 

Farris  (1890),  103  Mo.  78,  23  Am.  St.  « See  Wheeler  v.   Arnold  (1874), 

Rep.  863,  13  L.  R.  A.  354,  15  S.  W.  30  Mich,  304. 


RIGHTS    AND    DUTIES   OF   PARTNERS.       [§§  126,  127. 

or  if  it  was  not  fairly  and  in  good  faith  incurred,  or  if  the 
necessity  for  it  arose  only  through  his  own  negligence,  bad 
faith  or  breach  of  duty.^ 

§  126.  — —  On  illegal  transactions. — "  There  is  a  say- 
ing," remarks  Mr.  Justice  Lindley,^  "  that  there  is  no  contri- 
bution amongst  wrong-doers;  but  this  doctrine  is  certainly 
inapplicable  to  partners  in  the  general  form  in  which  it  is 
enunciated.  It  is  true  that,  if  a  partnership  is  itself  illegal, 
no  member  of  it  can,  in  respect  of  any  transaction  tainted 
with  the  illegality  which  infects  the  firm,  obtain  relief 
against  any  other  member;  but  there  is  no  authority  for 
saying  that  if  one  of  the  members  of  a  firm  sustains  a  loss 
owing  to  some  illegal  act  not  attributable  to  him,  but  yet 
imputable  to  the  firm,  such  loss  must  be  borne  entirely  by 
him,  and  that  he  is  not  entitled  to  contribution  in  respect 
thereof  from  the  other  partners.  The  claim  of  a  partner  to 
contribution  from  his  copartners  in  respect  of  a  ])artnership 
transaction  cannot  be  defeated  on  the  ground  of  illegality 
unless  the  partnership  is  itself  an  illegal  partnership;  or 
unless  the  act  relied  on  as  the  basis  of  the  claim  is  not  only 
illegal,  but  has  been  committed  by  the  partner  seeking  con- 
tribution when  he  knew  or  ought  to  have  known  of  its  ille- 
gality. In  any  of  these  cases  he  can  obtain  no  assistance 
against  his  copartners,  and  must  abide  the  consequences  of 
his  own  wilful  breach  of  the  law.^  .  .  .  But  if  the  part- 
nership is  not  itself  illegal,  and  if  the  partner  claiming  con- 
tribution has  not  himself  been  personally  guilty  of  a  breach 
of  the  law,  his  claim  will  prevail,  although  the  loss  in  re- 
spect of  which  it  is  made  may  have  arisen  from  an  unlawful 
act." 

§127.  ttow  enforced.— Whether  one  partner  has 

really  paid  more  than  his  justproi)ortion  on  the  jjartnership 

'See  McFadden  v.  Leeka  (1891),  "Quoted  witli  approval  in  Smith 
48  Ohio  St.  513,  28  N.  E.  Rep.  874        v.  Ayrault  (1888),  71   Mich.  475,  89 

«1  Lindiey  on  Partnership  (Ew    N.  W.  Rep.  724,  1  L.  R  A.  811. 
elis  2d  ed.),  378. 

D3 


§  127.] 


LAW    OF   PARTNEESHIP. 


account  is  often,  if  not  usually,  a  question  requiring  some  in- 
vestigation of  the  whole  partnership  accounts  to  determine. 
If  he  has  done  so  upon  one  occasion,  it  may  be  that  his  co- 
partner upon  some  other  occasion  has  paid  as  much  or  more 
under  similar  circumstances  for  which  he  also  has  a  claim 
against  the  firm ;  and  how  the  final  balance  will  stand  may  be 
a  matter  of  some  uncertainty,  which  it  will  require  a  general 
accounting  to  make  clear.  As  will  be  seen  in  the  succeeding 
chapter,  courts  of  law  are  not  usually  an  appropriate  forum 
for  taking  such  an  account,  and  the  parties  are  required  to 
go  into  a  court  of  equity.  The  result,  therefore,  is,  that  a 
partner's  claim  for  contribution  or  reimbursement  is  usually 
one  to  be  enforced  only  in  a  court  of  equity.'  It  is  not,  how- 
ever, always  so.  The  claim  may  arise  in  respect  of  some 
isolated  transaction ;  it  may  be  that  the  other  partner  has 
recognized  its  validity  and  expressly  promised  to  pay  his 
share ;  -  it  may  be  that  the  demand  did  not  arise  until  after 
an  accounting  or  a  dissolution  and  accounting :  ^  in  these 
and  like  cases,  as  will  be  seen  in  the  succeeding  chapter,  the 
objection  to  legal  proceeding  may  be  removed,  and  a  court 
of  law  rather  than  of  equity  may  take  jurisdiction. 


1  See  Lawrence  v.  Clark  (1840),  9 
Dana  (Ky.),  257,  35  Am.  Dec.  133; 
Kennedy  v.  McFaddon  (1811),  3  H. 
&  J.  (Md.)  194,  5  Am.  Dec.  434, 

2Seeposf,  §§139,  140. 


3  See  Logan  v.  Traysar  (1890),  77 
Wis.  579,  46  N.  W.  Eep.  877;  Sears 
V.  Starbird  (1889),  78  CaL  225,  20 
Pac.  Rep.  547. 


94 


CEAPTEK  YIIL 


OF  ACTIONS  BETWEEN  PARTNERS. 


g  128,  Of  actions  between  partners 
in  general. 

I.  Actions  at  Law. 
129.  What  cases  arise. 

1.  Partner  against  Firm, 

130-132.  One  partner  cannot  sue 
the  firm  at  law. 

2.  Finn  against  Partner. 

138.  Firm  cannot  sue  partner  at 
law. 

3.  Partner  against  Partner. 

134^  One  partner  cannot  sue  an- 
other at  law  on  claim  aris- 
ing out  of  partnership 
transactions. 

135.  One  partner  may  sue  if 
claim  does  not  involve 
partnership  transactions. 

136-142.  Illustrations  of  the  rule. 

143.  One  partner    may  sue  an- 

other for  breach  of  part- 
nership agreements. 

144.  For  wrongful  practices 

resulting  in  loss. 


§  145.  For  fraud  in  inducing 

partnership. 

146.  On    matters    distinct 

from  partnership. 

4.  Firm  against  Firm  having  Com- 
mon Partner. 

147.  One  firm  cannot  sue  another 

at  law  if  they  have  a  com- 
mon partner. 

II.  Actions  in  Equity. 

148.  Equity  the  proper  tribunal 

in  partnership  matters. 

1.  Specific  Performance. 
149-151.  In  what  cases  granted. 
3.  Injunctions. 

152.  In  what  cases  granted. 

3.  Accounting  and  Dissolution. 

153.  In  what  cases  granted. 

154.  Who  may  have  accounting. 

4.  Receiver. 

155.  When  receiver  appointed. 

156.  Powers    and    duties   of  re- 

ceiver. 


§  128.  Of  actions  between  partners  in  general. —  The 

question  of  the  remedies  which  partners  may  have  between 
themselves  involves  several  considerations  of  interest  and 
importance.  Certain  of  the  rules  applicable  result  from  the 
peculiar  relations  between  the  parties,  and  others  from  the 
peculiar  nature  of  the  interests  involved.  As  has  been  al- 
ready seen,  while  the  law  for  some  purposes  regards  the 

95 


$^§  129,  130.]  LAW   OF   PAETNEESHIP. 

lirm  as  a  distinct  entity,  for  most  purposes  the  partners 
must  be  regarded  as  individuals.  This  is  usually  the  rule  as 
respects  actions  at  law.  If,  therefore,  one  partner  would 
maintain  an  action  against  the  firm,  he  must  sue  himself  as 
a  partner  with  the  others.  If  he  should  recover  judgment 
against  the  firm,  he  might  be  called  upon  as  a  member  of 
the  firm  to  pay  or  satisfy  his  own  judgment.  If  he  bases 
an  action  upon  his  interest  in  the  partnership,  it  will  usually 
require  an  accounting  and  settlement  to  determine  what  his 
interest  is.  The  same  difficulties  would  usually  exist  if  the 
firm  were  to  sue  one  partner.  These,  and  other  like  con- 
siderations, have  led  to  the  establishment  of  certain  rules 
respecting  the  remedies  of  partners  as  between  themselves 
which  require  examination. 

I.  Actions  at  Law. 

§  129.  Ill  wliat  cases  the  question  arises. —  The  question 
of  the  right  to  maintain  an  action  at  law  respecting  partner- 
ship transactions  may  arise  in  four  classes  of  cases:  1.  "Where 
the  clahn  is  by  one  partner  against  the  firm;  2.  Where  the 
claim  is  by  the  firm  against  a  partner;  3.  Where  the  claim 
is  by  one  partner  against  one  or  more  of  his  fellow-partners; 
and  4.  Where  the  claim  is  between  firms  which  have  one  or 
more  partners  in  common. 

1.  Partner  against  Firm. 

§  130.  One  partner  cannot  sue  tlie  firm  at  law. —  1.  It 

is  the  general  rule  that  one  partner  cannot  sue  the  firm 
or  another  partner  at  law  upon  a  claim  against  the  firm 
arising  out  of  partnership  transactions  unless  the  partner- 
ship accounts,  at  least  so  far  as  that  claim  is  concerned,  have 
been  fully  settled,  and  a  final  balance  has  been  arrived  at  in 
his  favor,  or,  as  it  is  frequently  expressed,  unless  there  has 
been  an  account  stated  between  them.  If  such  a  balance  has 
been  reached  in  his  favor,  then,  if  there  is  no  express  promise, 
the  law  will  imply  a  promise  by  the  other  partner  to  pay  it, 

96"^ 


ACTIONS   BETWEEN   PARTNERS.  [§  131. 

and  the  promise  becomes,  by  the  accounting,  so  far  trans- 
formed from  a  partnership  liability  into  a  personal  and 
private  one,  that  the  partner  entitled  may  sue  the  partner 
obligated  in  an  action  at  law.  Thus,  as  illustrations  of  the 
general  rule,  one  jiartner  cannot,  in  the  absence  of  such  a 
iinal  accounting,  sue  the  other  partners  at  law  to  recover 
for  his  services  where  there  is  an  agreement  to  pay ;  or  to 
recover  for  advances  or  loans  which  he  has  made  to  the 
firm,  or  for  money  which  he  has  paid  out  on  its  account,  or 
for  goods  which  he  has  sold  to  the  firm,  or  for  the  rent  of 
premises  which  he  has  leased  to  the  firm.^  In  all  these  and 
like  cases,  the  remedy  of  the  partner,  as  will  be  seen,  is  to 
go  into  a  court  of  equity,  praying  for  an  accounting  and, 
usually,  for  a  dissolution. 

§  131. Reason  for  the  rule. —  The  reason  for  the  rule 

is  that  it  is  ordinarily  impossible  to  determine  whether  the 
firm  is  really  indebted  to  the  plaintiff  partner  or  not  until 
the  partnership  accounts  are  settled  and  the  true  standing 
of  the  parties  ascertained;  and  the  process  and  remedies 
afforded  by  a  court  of  law  are  not  usually  adequate  or  ap- 
propriate to  the  investigation  of  claims  requiring  such  an 
accounting.  Where,  however,  the  parties  themselves  have 
made  an  investio-ation  and  have  stated  the  result  showino;  a 
balance  due  to  one  of  the  partners,  the  chief  objection  to  a 
suit  at  law  is  obviated  and  it  may  therefore  be  maintained. 

1  See  Newby  v.  Hanell  (1888),  99  value,  the  latter  may  recover  of 

N.  C.  149,  6  Am.  St.  Rep.  503,  5  S.  E.  the    firm   (Carpenter  v.   Greenup, 

Rep.  284;  Duff  v.  Maguire  (1868).  99  (1889),  74  Midi.  664,  42  N.  W.  Rep. 

Mass.  300;  O'Brien  v.  Smith  (1889),  276,  16  x\m.  St.  Rep.  660.  4  L.  R  A. 

42  Kan.  49,  21  Pac.  Rep.  784;  Rem-  241;  Walker  v.  Wait  (1878),  50  Vf. 

ington  V.  Allen  (1871),  109  Mass.  47;  668);  though  this  would  not  be  the 

Mickle  v.  Peet  (1875),  43  Conn.  65;  result  if  the  transfer  were  merely 

Pico  V.  Cuyas  (1873),  47  Cal.  174.  to  enable  the    transferee    to  sue 

Whore  a  partner  loans  money  to  (Wintermute  v.  Tarrant  (1890),  83 

the  firm  and  takos  tlie  firm's  noto,  Mich.  555,  47  M.  W.  Rep.  358);  or  if 

the  note  is  valiil,  though  the  part-  the  note  were  so  transferred  that 

ner  hitnself  cannot  sue   upon   it,  the  action  must  he  brought  in  the 

and  if  he  indorses  to  a  holder  for  name  of  the  as.signor.  Davis  v. 
7                                              07 


§§  132-13i.]  LAW    OF    PARTNERSHIP. 

§  132.  When  rule  does  not  apply.  —  The  general 

rule  has  been  held  not  to  apply  where  the  partnership  w^as 
a  special  one,  for  a  single  and  finished  transaction  only,  or 
where  all  of  the  partnership  affairs  have  been  settled  except 
a  single  transaction,  or  where  the  accounts  are  so  simple  and 
easily  adjusted  as  to  leave  no  necessity  for  an  accounting  in 
equity.^ 

2.  Firm  against  Partner. 

%  133.  One  partner  cannot  sue  another  at  law  on  claim 
due  the  firm.  —  2.  The  same  general  rule  applies  where  it 
is  sought  to  recover  of  one  partner  for  a  debt  due  by  him  to 
the  hrm  on  account  of  partnership  dealings  or  transactions. 
Thus,  an  action  at  law  cannot  be  maintained  by  one  or  more 
partners  against  another  partner  to  recover  for  goods  sold 
to  him  by  the  firm,  or  for  the  recovery  of  money  due  from 
him  to  the  firm  upon  his  note  or  otherwise,  though  a  hona 
fide  indorsee  of  the  note  might  sue.^ 

3.  Partner  against  Partner. 

§  134.  One  partner  cannot  sue  another  at  law  on  claim 
arising  out  of  partnership  transactions.  —  3.  The  ques- 
tion of  the  right  of  one  partner  to  sue  another  may  arise: 
{a)  Out  of  partnership  transactions;  (J)  Out  of  transactions 
arising  prior  or  subsequent  to  the  partnership,  though  con- 
nected with  it;  and  (c)  Upon  matters  having  no  connection 
with  the  partnership. 

a.  In  the  first  of  these  cases,  the  general  rule  above  given 
applies,  i.  e.,  one  partner  cannot  sue  another  at  law  upon 
matters  growing  out  of  the  partnership  transactions,  unless 

Merrill  (1883),  51  Midi.  480, 16  N.  W.  2  See  Parker  v.  Macomber  (1836), 

Rep.  864.  18  Pick.  (Mass.)  505;  Bank  v.  Del- 

1  See  Fry  v.  Potter  (1880),  12  R.  I.  afield  (1891),  126  N.  Y.  410,  27  N.  E. 

542;  Kutzv.  Dreibelbis  (1889),  126  Rep.  797;   Burley  v.  Harris  (1836), 

Pa.    St.    335,    17    Atl.    Rep.    609;  8  N.  H.  233,  29  Am.  Dec.  650;  Ivy 

Wheeler  v,  Arnold  (1874),  80  Mich.  v.  Walker  (1880),  58  Miss.  253. 
304;  Clarke  v.  Mills  (1887),  36  Kan. 
393. 

98 


ACTIONS    BETAVEEN    PARTNERS.  [§§  13rj-loJS. 

there  has  been  an  accounting  and  a  balance  struck  in  his 
favor,  ^^hen,  however,  such  a  bahince  is  struck  and  a 
stated  amount  is  found  to  be  due  to  one  from  the  other,  who 
promises  to  pay  it,  an  action  may  be  maintained  for  its  re- 
covery. As  stated  in  one  case:  ""Where  there  is  an  agree- 
ment adjusting  partnership  affairs,  and  that  agreement 
awards  to  one  partner  a  specified  sum  or  creates  a  specific 
duty  in  his  favor,  he  may  maintain  an  action  upon  a  breach 
of  the  duty  or  promise."  ^ 

^  135.  One  partner  may  sue  another  at  laAv  upon  claim 
connected  with  but  not  involving  partnership  transac- 
tions.—  h.  But  there  is  a  large  class  of  cases  involving  mat- 
ters which,  though  they  are  connected  with  the  partner- 
ship, do  not  constitute  partnership  transactions,  but  are 
individual  transactions  between  particular  partners,  and  as 
to  these  an  action  at  law"  may  be  maintained.     Thus  — 

§  136.  As  for  not  forming  partnership  as  agreed. — 

A  breach  of  an  agreement  to  enter  into  partnership,  or  to 
permit  a  person  to  become  partner,  may  furnish  the  basis 
of  an  action  at  law",  because  here,  though  a  partnership  was 
contemplated,  it  was  never  created,  and  there  can  conse- 
quently be  no  partnership  transactions  involved,  and  no 
necessitj''  for  an  accounting.^ 

§  137. Or  for  dissolving  contrary  to  agreement. — 

For  like  reasons,  an  action  at  law  may  be  maintained  by  one 
partner  against  another  who  has  dissolved  the  partnership 
in  violation  of  his  agreement  that  it  should  continue  for  a 
definite  term.' 

§  138.  Or  for  not  furnishing  capital  as  agreed.— 

An  action  at  law  may  be  maintained  by  one  j)artner  against 

iDouthit  V.   Douthit  (1892),  133        2  Hill   v.   Palmer  (1883),  56  Wis. 
Ind.  26,  32  N.  E.  Kep.  715.    See,  also,     123.  43  Am.  M^\).  703. 
Beede  v.  Fraser  (1894),  66  Vt.  114,        »  BaKley  v.  Smith  (1853),  10  N.  Y. 
28  Atl.  Rep.  880,  44  Am.  St.  Rep.     489,  61  Am.  Dec.  756. 
824. 

99 


§§  139-1-il.]  LAW    OF    PAETNEESHIP. 

another  to  recover  damages  for  the  latter's  breach  of  his 
agreement  to  contribute  capital  or  furnish  goods,  or  do  any 
other  act  to  start  or  launch  the  partnership.^  "An  agreement 
to  pay  money  or  to  furnish  stock,"  said  the  conrt  in  a  recent 
case,-  "  for  the  purpose  of  launching  the  partnership,  is  an 
individual  engagement  of  each  partner  to  the  other,  and  the 
defaulting  partner  may  be  sued  in  an  action  at  law  upon  his 
agreement.  It  is  entirely  separate  and  distinct  from  the 
partnership  accounts,  and  this  forms  the  true  test  in  deter- 
mining whether  an  action  at  law  will  lie  by  one  partner 
against  his  copartner." 

§  139. Or  for  not  reimbursing  for  capital  advanced. 

If  one  partner  advances  money,  or  pays  for  goods,  or  fur- 
nishes any  other  thing  at  the  request  of  the  other  to  enable 
the  latter  to  supply  his  portion  of  the  agreed  capital,  an  ac- 
tion at  law  will  lie  for  reimbursement.^ 

g  140.  Or  for  not  indemnifying  as  agreed.  — If  one 

partner  agrees  with  another  to  pay  a  firm  debt  out  of  his 
private  funds  or  to  hold  the  other  harmless  from  liability  by 
reason  of  any  partnership  transaction,  an  action  at  law  may 
be  maintained  for  a  breach  of  the  agreement.* 

§  141.  Or  for  not  paying  debts  assumed. —  If  one 

partner  upon  dissolution  agrees  to  pay  the  debts  of  the  firm, 
or  to  collect  the  debts  and  pay  over  a  share  of  the  collec- 
tion, an  action  at  law  may  be  maintained  if  the  agreement 
is  broken.* 

1  See  Scott  v.  Campbell,  30  Ala.  133,  28  N.  W.  Rep.  753;  Bull  v.  Coe 
728;  Sprout  v.  Crowley,  30  Wis.  (1888).  77  Cal.  54,  18  Pac.  Rep.  808. 
187.  11  Am.  St.  Rep.  235;  Smith  v.  Kemp 

2  Cook  V.  Canny  (1893),  96  Mich.  (1892),  92  Mich.  357,  52  N.  W.  Rep. 
398,  55  N.  W.  Rep.  987.     To  like  ef-  639. 

feet:  Brown  v.  Tapscott  (1840),  6  ^See  Miller  v.  Bailey  (1890),  19 

Mees.  &  Wels.  119,  Ames'  Cases  on  Oreg.  539,  25  Pac.  Rep.  27;  Edwards 

-Partn.    468;     Scott    v.     Campbell  v.  Remington  (1881),  51  Wis.  336; 

(1857),  30  Ala.  728;  Sprout  v.  Crow-  Kellogg  v.  Moore  (1881),  97  111.  283. 

ley  (1872),  30  Wis.  187.  » See  Thropp  v.  Richardson  (1890), 

3  Bates  V.  Lane  (1886),  63  Mich.  132  Pa.  St.  399,19  Atl.  Rep.  2-18; 

100 


ACTIONS    BETWEEN    PARTNERS.  [§§  142-146. 

§  142.  Or,  generally,  where  partnership  transac- 
tion hy  agreement  is  transformed  into  individual  one. — 

And,  general!}",  the  partners  may,  by  express  agreement, 
transform  a  partnership  transaction  into  the  individual  one 
of  one  of  the  partners,  and  upon  matters  thus  separated 
from  the  partnership  affairs  an  action  at  law  may  be  main- 
tained.^ 

§  143.  One  partner  may  sue  another  for  breach  of  part- 
nership agreements. —  Actions  at  law  may  also  be  main- 
tained by  one  partner  against  another  for  a  breach  of  such 
stipulations  or  agreements  in  the  partnership  articles  as 
were  designed  for  the  protection  of  the  partner  complain- 
ing, as  upon  a  breach  of  an  agreement  not  to  sign  the  firm 
name  as  an  accommodation  indorser.- 

§  144.  One  partner  may  sue  another  for  wrongful  prac- 
tices resulting  in  loss. —  And  the  same  rule  would  apply 
where  one  partner,  by  fraudulent  practices,  or  by  any  wrong- 
ful act,  in  violation  of  his  duty  as  a  partner,  should  impose 
loss  upon  his  partner,  as  by  giving  the  firm  note  without  au- 
thority for  his  private  debt.^ 

§  145.  One  partner  may  sue  another  for  fraud  in  in- 
ducing partnership. —  So  an  action  at  law"  will  lie  for  mis- 
representations or  deceit  by  one  partner  in  inducing  another 
to  become  a  partner.* 

§  146.  On  matters  distinct  from  partnership  one  partner 
may  sue  another. —  g.  As  to  matters  entirely  distinct  from 

Ferguson  v.  Baker  (1889),  116  N.  Y.        3  See  Fuller  v.  Fercival  (1879),  120 

257,  22  N.  E.  Rep.  400.  Mass.  381:  Calkins  v.  Smith  (1872), 

iSee  Ryder  v.  Wilcox  (1869),  103  48  N.  Y.  014;  Boughner  v.  Black's 

Mass.   24;   Purvines  v.   Champion  Adm'r  (1886),  83  Ky.  521,  4  Am.  St! 

(1873),  07  111.  459;  Neil  v,  Greenleaf  Rep.  174. 

(1875),  26  Ohio  St.  567;  Emery  v.         •'See  Rit-e  v.  Culver  (1H80).  ;?2  N. 

Wilson  (1879),  79  N.  Y.  78.  J.E(i.601:  Morse  v.  ]lu1cliius(1869), 

^  See  Stone  v.  Wendover  (1H7()),  2  102  Mass.  439;  Halo  v.  Wilson  (1873), 

Mo.  App.  247;  Vance  v.  Blair  (1849),  112  Mass.  444. 
18  Ohio,  532,  51  Am.  Dec.  467. 

101 


§  147.]  LAW    OF    PARTNERSHIP, 

the  partnership  affairs,  one  partner  may,  of  course,  sue  another 
as  freely  as  though  in  respect  to  other  matters  they  did  not 
sustain  the  relation  of  partner.^ 

4.  Firm  against  Firm  having  Common  Partners. 

§  147.  One  firm  cannot  sue  another  at  law  if  there  is  a 
common  partner. —  4.  In  the  absence  of  a  statute  authoriz- 
ing it,  one  firm  cannot  maintain  an  action  at  law  against  an- 
other firm  if  there  are  partners  common  to  both  firms.  The 
death  of  the  common  partner  will  not  remove  the  impedi- 
ment as  to  matters  arising  before  the  death,  nor  will  the  dis- 
solution of  the  firm.  The  nature  of  the  claim  is  immaterial, 
if  it  is  an  obligation  in  favor  of  one  firm  and  against  the 
other  as  such.  The  forum  for  actions  in  such  cases  is  the 
court  of  equity.- 

It  is  not  permitted,  it  is  said  in  one  case,^  "  that  one  of 
the  parties  should  thus  appear  both  as  a  plaintiff  and  de- 
fendant, in  effect  prosecuting  an  action  against  himself,  in 
which,  if  a  recovery  were  to  be  allowed,  it  would  be  in  his 
favor  and  at  the  same  time  against  himself.  Nor,  at  law, 
w^ould  the  contract  or  agreement  between  the  two  firms  hav- 
ing a  common  member  be  recognized  as  creating  a  legal  ob- 
ligation or  cause  of  action.  The  transaction  would  be  treated 
as  an  attempt  by  a  party  to  enter  into  a  contract  with  him- 
self.^ The  remedial  system  of  the  common  law  was  too  in- 
flexible and  restricted  to  enable  it  to  adjust  the  complex 
rights  and  obligations  of  the  parties  under  such  circum- 
stances. But  in  equity  the  agreements  of  the  members  of 
firms  so  related  to  each  other  were  treated  as  obligatory, 
and  the  fact  that  one  of  the  parties  to  the  joint  contract 

1  See  Elder  v.  Hood  (1865).  38  111.        »  Crosby  v.  Timolat,  suiwa. 

538;  Newsom  v.   Pitman  (1892),  98  *  Citing   Bosanquet   v.   Wray,  6 

Ala.  526,  12  So.  Rep.  412.  Taunt.  597;  De  Tastet  v.  Shaw,  1 

2  See  Hall  v.  Kimball  (1895),  77  111.  Barn.  &  Aid.  664.  669;  Leake,  Cont. 
161;  Crosby  v.  Timolat  (1892),  50  439,  440;  McFadden  v.  Hunt,  5 
Minn.  171,  52  N.  W.  Rep.  526;  Bea-  Watts  &  S.  468;  Price  v.  Spencer, 
cannon  v.  Liebe  (1884),  11  Oreg.  443,  7  Phila.  178. 

5  Pac.  Rep.  273. 

103 


ACTIONS   BETWEEN    PAKTXEKS.  [g§  148,  149. 

stood  in  tbe  position  of  both  an  obligor  and  obligee  did  not 
stand  in  the  Avay  of  affording  such  relief  or  remedy  as  might 
be  found  to  be  appropriate  and  necessary  to  the  ends  of 
justice."^ 

II.   Of  Actions  in  Equity. 

§  148.  Equity  the  proper  tribunal  in  partnership  mat- 
ters.—  The  court  of  equity  is  the  chief  and  aj)propriate  tri- 
bunal for  the  settlement  of  all  controversies  ii-rowino-  out  of 
partnership  transactions  as  such.  Its  principal  function  is 
in  winding  up  the  partnership  affairs  and  arriving  at  the  re- 
spective interests  therein  of  the  partners  and  creditors,  but 
its  aid  may  often  be  sought  in  other  matters.     Thus  — 

1.  Speoific  Performance. 

§  149.  In  what  cases  granted. —  Something  of  the  power 
of  the  courts  of  equity  to  enforce  specific  performance  of 
partnership  agreements  has  been  already  considered  in  a 
previous  section,-  and,  as  there  noticed,  the  jurisdiction  is 
limited  by  the  nature  of  the  case.  But  such  stipulations  as 
are  capable  of  specific  performance  will  be  enforced,  either 
directl}^  or  negatively  by  an  injunction  against  their  breach.^ 

1  Citing  1  Story,  Eq.  Jur.,  §§  079,  books  and  the  furnishing  of  copies 
680;  Haven  v.  Wakefield,  39  111.  thereof  (Lingen  v.  Simpson,  1 
509;  Chapman  v.  Evans,  44  Miss.  Simons  &  Stuart,  600);  agreements 
113;  Calvifs  Ex'rs  v.  Markham,  3  that  a  third  party,  and  he  only, 
How.  (Miss.)  343;  Hayes  v.  Bement,  shall  get  in  debts  (Davis  v.  Amer, 
3  Sandf.  394.  3  Drew.  64;  Turner  v.  Major,  3 
''-  Ante,%^\.  Giff.  442);  agreements  that  the 
3  In  1  Lindley  on  Partnership,  value  of  the  share  of  an  outgoing 
478,  it  is  said:  "The  court  has  en-  or  a  deceased  partner  shall  be  as- 
forced  the  following  agreements  certained  in  a  specified  way  and 
entered  into  upon  or  with  a  view  taken  accordingly  (Jlorris  v.  Kears- 
to  a  dissolution,  namely:  Agree-  ley,  2  Y.  &  C.  Ex.  139;  Essex  v. 
ments  not  to  carry  on  business  Essex,  20  Beav.  !42:  King  v.  Chuck, 
within  a  certain  distance  or  for  a  17  Beav.  325);  agreements  that  an 
certain  space  of  time  (Wliittakcr  outgoing  partner  shall  offer  his 
V.  Howe.  3  Beavan,  3.S3;  Turner  v.  share  to  his  copartners  before  sell- 
Major,  3  Giffard,  412);  agreements  ing  it  to  other  persons  (llomfray 
as  to  the  custody  of  i»artnership  v.   Fothergill,    1     llij.   ."wj;);    agree- 

103 


§  150.]  LAW    OF    PARTNERSHIP. 

The  chief  objections  which  arise  to  the  exercise  of  the 
power  to  grant  specific  performance  in  partnership  cases  are 
those  which  inhere  in  the  peculiar  nature  of  the  subject. 
Thus,  where  the  purpose  is  to  compel  parties  to  enter  into 
partnership  as  agreed,  if  no  time  was  stipulated  for  its  con- 
tinuance, of  what  av^ail  is  it  to  enforce  the  creation  of  a 
partnership  which  the  parties  maj^  immediately  dissolve?  — 
if  a  term  of  continuance  was  agreed  upon,  can  the  court  as- 
sume the  task  of  constantly  watching  the  parties  to  observe 
whether  they  are  performing  their  duties  as  partners? 

§  150.  Same  subject. —  In  one  case^  in  which  the  ques- 
tion arose,  the  court,  in  denying  the  application,  said :  "  It  is 
extremely  plain  that  the  court  cannot  assume  to  enforce  the 
performance  of  daily  prospective  duties,  or  supervise  or  di- 
rect in  advance  the  course  or  conduct  of  one  who  is  to  con- 
trol and  manage  in  the  interest  of  a  firm  in  which  he  is  to 
stand  as  a  member,  and  where,  too,  the  stipulated  arrange- 
ment as  plainly  set  forth  contemplates  that  his  personal  skill 
and  judgment  shall  be  applied  and  govern  according  to  the 
shifting  needs  of  property  and  business.  No  court  is  com- 
petent to  execute  such  an  arrangement." 

In  another  case,^  involving  the  same  question,  the  court 
said:  "It  is  a  rule  in  equity  that  the  court  w411  not  decree 
a  specific  ])erformance  where  it  has  no  power  to  enforce  the 
decree.  Hence  partnership  articles  will  not  be  enforced, 
especially  Avhere  no  time  is  fixed  for  its  continuance,  as 
either  party  may  dissolve  it  at  pleasure.  And  even  where 
a  time  is  fixed  it  is  difficult  to  see  how  the  decree  can  be 
enforced.  Take  this  case  as  an  illustration :  Is  the  court  to 
keep  its  hand  on  the  parties  for  seventeen  years  and  compel 
them  to  carry  on  this  business?" 

ments  to  grant  an  annuity  to  a    trade   secret   (Morison  v.  Moat,  9 
retiring   partner    and   his  widow    Hare,  241)." 

(Aubin  V.  Holt,  2  K.  &  J.  66;  Page        i  Buck  v.  Smith  (1874),  29  Mich. 
V.  Cox,  10  Hare,  163);  agreements    168,  18  Am.  Rep.  84. 
not  to  divulge  or  make  use  of  a        2  Morris    v.   Peckham  (1883),   51 

Conn.  128,  Paige's  Partn.  Cas.  11^. 
104 


ACTIONS   BETWEEN   PARTNERS.  [§§  151,  152. 

§  151.  Same  subject. —  There  may,  however,  be  cases  in 
which  the  court  will  enforce  specific  performance  of  an  agree- 
ment to  form  a  partnership,  notwithstanding  that  it  may 
be  immediately  dissolved.  This  will  be  done,  for  example, 
where  it  will  secure  to  a  partner  the  interests  in  property  to 
which  by  the  partnership  agreement  he  is  entitled,^ 

2.   Of  Injunctions. 

§  152.  lu  what  cases  granted.— Injunctions  are  fre- 
quently granted  upon  the  application  of  one  partner  against 
his  copartner,  either  before  or  pending  or  after  a  dissolu- 
tion. 

1.  Before  dissolution,  and  for  the  very  purpose  often  of 
obviating-  the  necessity  for  a  dissolution,  injunctions  mavbe 
granted  to  prevent  the  commission  by  partners  of  acts  in- 
consistent with  the  terms  of  their  agreement  or  violating  the 
rights  of  their  copartners.  Thus,  one  partner  may  be  en- 
joined from  obstructing  or  impeding  the  business;  excluding 
another  partner  from  his  rightful  share  in  the  management 
of  the  business;  interfering  with  the  servants  of  the  firm; 
removing  the  books  or  papers  of  the  firm;  using  partnership 
])roperty  for  individual  purposes;  engaging  in  a  rival  busi- 
ness; extending  the  partnership  transactions  beyond  the 
limits  agreed  upon ;  publishing  a  notice  of  dissolution  before 
the  stipulated  term  has  expired,  and  the  like.^ 

2.  Pending  an  applioation  for  a  dissolution  or  for  an  ac- 
counting, injunction  may  be  issued  to  restrain  one  partner 
from  interfering  with  the  property,  creating  new  liabilities, 
and  the  like.^ 

3.  After  dissolution,  one  partner  may  bo  enjoineil  from 
wasting,  injuring,  disposing  of  or  wrongfully  dealing  with 

iSomerVjy   v.  Buntin   (1875),  118  44  Miss.  202;  Van  K.urrii    v.  Trcii- 

Mass.  270,  19  Am.  Rc'i).  4r)0.  ton   Mfj,'.  Co.    (I.^(U),  U  N.  .J.    Eci. 

2  Sfc  Marble  Co.  v.  Ripley  (1870),  :J02;  Loviiie  v.  l\Iii-iia('l  (IMSM),  :<r)  La. 

10  Wall.  (U.  S.)  :«0;  Pirtle  v.  Penn  Ann.  1121. 

(1835),  3  Dana  (Ky.),  247,  28  Am.        aSce  Wilson  v.  Kildili  r  (I'l^s.-)),  11 

Dec.   70;    New    v.   Wright  (1870),  N.  J.  Eq.  71. 

105 


§  153.]  LAW    OF    PARTNERSHIP. 

the  assets;  from  holding  out  the  complainant  as  being  still 
a  partner;  from  continuing  business  in  violation  of  his  agree- 
ment ;  from  using  the  old  firm  name  in  such  a  way  as  to 
render  former  partners  liable,  and  the  like.' 

3.   Of  Accoimting  and  Dissolution. 

§  153.  lu  what  cases  granted. —  The  most  common  ground 
for  appealing  to  a  court  of  equity  is  to  secure  an  accounting 
to  determine  the  interests  of  partners  and  creditors,  to  ad- 
just mutual  claims  and  demands,  and  to  obtain  a  decree  for 
payment  and  distribution.  The  jurisdiction  of  a  court  of 
equity  for  these  purposes  is  ample  and  its  power  to  enforce 
its  decrees  complete."^  Its  aid,  however,  must  be  sought  be- 
fore the  claim  has  become  stale,  and  the  complainant's  laches 
may  bar  relief.^ 

An  accounting  is  usually  coupled  with  a  demand  for  disso- 
lution, and  it  was  formerly  the  rule  that  accounting  would 
not  be  granted  where  it  would  not  be  complete  and  final  or 
unless  it  was  coupled  with  a  dissolution ;  but  the  modern  au- 
thorities have  relaxed  this  rule,  and  there  are  now  cases  in 
which  an  accounting  alone  may  be  granted.  The  most  im- 
portant of  these,  according  to  Mr.  Justice  Lindley,^  are  three : 

1.  Where  one  partner  has  sought  to  withhold  from  his  co- 
partner  the  profit  arising   from   some  secret  transaction. 

2.  Where  the  partnership  is  for  a  term  of  years  still  unex- 
pired, and  one  partner  has  sought  to  exclude  or  expel  his 
copartner  or  to  drive  him  to  a  dissolution.  3.  Where  the 
partnership  has  proved  a  failure,  and  the  partners  are  too 
numerous  to  be  made  parties  to  the  action,  and  a  limited  ac- 

1  See  McGowan  Co.  v.  McGowan  Clark  v.  Gridley  (1871),  41  Cal.  119; 
(1872),  22  Ohio  St.  370;  Wilkenson  Denver  v.  Roane  (1878),  99  U.  S. 
v.  Tilden  (1881),  9  Fed.  Eep.  683;     355. 

Roberts  v.   McKee   (1859),   29   Ga.  3  See   Bell  v.  Hudson  (1887).   73 

161;  Shannon  v.  Wright  (18831,60  Cal.  285,  2  Am.  St  Rep.  791,  and 

Md.   520;     Fletcher    v.    Vandusen  note. 

(1879),  52  Iowa,  448.  4  g  Lindlej^  on  Partnership  (E\v- 

2  See  Bracken  v.  Kennedy  (1842),  ell's  ed.),  495. 
4  111.  558,  Paige's  Partn.  Cas.  170; 

106 


ACTIONS   BETWEEN   PARTNERS.  [§§  154,  155, 

count  will  result  in  justice  to  them  all.  To  these  may  bo 
added  the  case  Avhere  the  partnership  agreements  provide  for 
periodical  accountings  or  accountings  as  to  distinct  trans- 
actions.^ 

In  these  cases,  however,  an  accounting  will  not,  except  in 
pursuance  of  partnership  agreements,  be  granted  of  an  iso- 
lated portion  of  what  has  been  dealt  with  as  a  complete  and 
general  whole.- 

The  effect  of  the  illegality  of  the  transaction  in  an  action 
for  accountiug  has  already  been  referred  to.^ 

§  154.  Same  subject  —  Who  may  demaiid  aceoniiting.— 

The  application  for  the  accounting  may  be  made  by  a 
partner;  by  an  employee  who  takes  a  share  of  profits  by 
way  of  compensation  for  his  services ;  by  the  personal  rep- 
resentative of  a  deceased  partner;  by  the  assignee  or  pur- 
chaser of  the  interest  of  a  partner;  by  the  purchaser  of  a 
share  upon  a  sale  on  execution;  but  not  usually  by  a  gen- 
eral creditor.^ 

4.   Of  Receivers. 

§  155.  When  will  be  appointed. — Receivers  are  frequently 
appointed  in  the  settlement  of  partnership  affairs,  though 
the  appointment  is  not  a  matter  of  course  and  will  not  be 
made  unless  good  grounds  exist  for  it.  A  receiver  will  not 
usually  be  appointed  exce})t  upon  dissolution ;  but  the  ap- 
pointment may  be  made  before,  if  a  dissolution  is  inevitable, 
or  if  the  partnership  is  insolvent  and  the  assets  are  being 
wasted  or  improperly  ap})lied;  but  mere  disputes  or  ill-feel- 

1  See  Patterson  v.  Ware  (184G),  15  47  N.  J.  Eq.  505).  21  Atl.  Rep.  297, 24 
Ala.  444:  Wadley  v.  Jones  (1875),    Am.  St.  Re]).  41!). 

55  Ga.  329.  '•See  Bentley  v.  Harris  (1H7:J).  10 

2  See  Davis  v.  Davis  (1882),  CO  R.  I.  434. 14  Am.  Rep.  (595;  Freeman 
Miss.  61.5.  V.   Freeman  (18.S4),   13(5  Jlass.  2(;0; 

3 See  a?i«e,  §20.  See,  also,  Pfeuirer  Gerard  v.  Bates  (1 HHH),  124  III.  150, 
v.Maltby(1881),54Tex.454,38  Am.  7  Am.  St.  Rep.  350,  10  N.  E.  Rep. 
Rep.  631;  Pennington  v.  Todd  (1890),     258;  Cliannon  v,  Stewart  (1882),  103 

111.  541,  Paige's  Partn.  Gas.  179. 
107 


§  15G.]  LAW  OF  partnp:rship. 

ing  among  the  partners  is  not  a  sufficient  ground,^  It  may 
be  made  also  where  one  partner  is  insolvent  and  is  wasting 
the  assets  or  breaking  up  the  business.^  A  receiver  may  be 
appointed  to  supersede  a  surviving  partner  or  a  sole  manag- 
ing partner  if  he  is  acting  wrongfully  or  misusing  or  misap- 
plying the  assets.^  One  of  the  partners  may  be  appointed 
receiver  if  he  is  otherwise  a  suitable  person. 

§  156.  Powers  and  duties  of  receiver. —  The  receiver  is 
an  officer  of  the  court  and  acts  under  its  direction.  He 
mav  be  authorized  to  continue  the  business  lono-  enough  to 
permit  its  being  wound  up  without  sacrifice.  He  has  not 
the  title  to  the  property,  but  the  right  of  possession  and  dis- 
position, and  should  be  given  control  of  all  of  the  assets  of 
the  firm.  He  may  sue  in  his  own  name  to  collect  the  debts, 
but  he  cannot  usually  be  sued  without  the  consent  of  the 
court,  nor  can  creditors  of  the  firm  levy  upon  the  property 
in  his  possession.'* 

iSee  New  v.  Wright  (1870).  44  ■'See  Jackson  v.  Lahee  (1886),  114 

Miss.  202,  Paige's  Partn.  Cas.  181.  111.  287,  2  N.  E.  Rep.  172;  Morey  v. 

2  See  Shannon  v.  Wright  (1883),  Grant  (1882),  48  Mich.  326, 12  N.  W. 
60  Md.  520;  Phillips  v.  Trezevant  Rep.  202;  Henning  v.  Raymond 
(1872),  67  N.  C.  370.  (1886),  35  Minn.  303,  29  N.  W.  Rep, 

3  See  Word   v.   Word  (1889),  90  132. 
Ala.  81. 

108 


CHAPTER  IX. 


OF  THE  POWERS  OF  PARTNERS. 


§  157.  In  general. 

I.  Powers  as  Between  Partners 
Themselves. 

158.  As     between     themselves, 

partners  may  agree  upon 
powers. 

159.  If  no  agreement,  usual  pow- 

ers implied. 

IL  Powers  as  Between  Firm  and 
Third  Persons. 

160.  Of  what  matters  third  per- 

sons must  take  notice, 

161.  Nature  and  extent  of  busi- 

ness to  be  observed, 

162.  Distinction  between  trading 

and  non-trading  firm, 

163.  Power  of  one  partner  to  dis- 

sent from  proposed  acts. 

164.  Of  the  partner  as  the  agent 

of  the  firm, 

165.  Partner  no  implied  power 

outside  the  scope  of  busi- 
ness. 

166.  What  is  meant  by  scope. 

167.  Extending     scope     by 

conduct. 


168. 

Consideration  of  particular 

powers. 

169. 

-— ^  Admissions. 

170, 

Agents. 

171. 

Arbitration. 

172. 

Assignments  for  cred- 

itors. 

173. 

—  Attorneys. 

174. 

Bills  and  notes. 

175. 

Borrowing  money. 

176. 

— -  Buying. 

177. 

Collecting  and  receiv- 

ing payment. 

178. 

Compromises. 

179. 

Confessing  judgment. 

180. 

— —  Deeds  and  other  sealed 

instruments. 

181. 

- —  Hiring  property. 

182. 

— -  Insurance. 

18a 

]\Iortgages  and  pledges. 

184. 

— —  Notice. 

185. 

Payment. 

186. 

—  Sales, 

187. 

Suits  at  law. 

188. 

Suretyship    and    guar- 

anty. 

189. 

The  powers  of  the  majority. 

190. 

Ratification  of  unauthorized 

acts. 

§  157.  In  general.— The  relation  of  partnership,  as  has 
Ijeen  seen,  creates  the  relation  of  principal  and  agent  be- 
tween the  partners,  each  partner  being  at  once  principal  of 
and  agent  for  the  others.     Ctjurts  which  have  adopted  the 

100 


§  158.]  LAW    OF   PARTNERSHIP. 

idea  of  the  distinct  entity  of  the  partnership  regard  each 
partner  as  agent  for  the  firm,  as  a  collective  body,  rather 
than  as  principal  for  himself  and  agent  for  the  others.  The 
results,  however,  are  not  materially  different,  and  it  is  suffi- 
cient for  our  purpose  to  say  that  the  power  of  each  partner 
to  bind  himself  and  his  partners  —  or,  in  other  words,  to 
bind  the  firm  —  rests  substantially  upon  the  general  prin- 
ciples of  agency. 

It  will  be  evident  that  the  power  of  the  partner-agent  to 
bind  his  principal,  i.  e.,  his  partners  or  the  firm,  presents  the 
same  two  aspects  that  have  been  discovered  in  the  law  of 
agency,  namely: 

(1)  The  power  as  between  the  partner  and  the  firm,  and 

(2)  The  power  as  between  the  firm  and  third  persons. 

1.  Powers  as  Between  the  Partners  Themselves. 

§  158.  As  between  themselves,  partners  may  fix  powers 
by  agreement. —  It  has  been  seen  that,  between  the  agent 
and  the  principal,  the  powers  of  the  agent  may  be  fixed  by 
their  agreement,  and  that,  as  between  these  parties,  the 
agreement  so  made  is  usually  conclusive,  even  though,  as 
between  the  principal  and  third  persons,  the  principal  may 
be  held  liable  for  the  agent's  exercise  of  more  extended 
powers.  The  same  rule  applies  here.  The  partners  may  by 
their  own  agreement  determine  the  powers  which  shall  be 
exercised  by  each  partner,  and  between  themselves  this 
agreement,  unless  expanded  or  waived,  will  be  conclusive. 
It  will  also  be  conclusive  as  respects  third  persons  who  have 
notice  of  the  agreement;  but  secret  limitations  upon  the 
usual  powers  of  a  partner  can  be  no  more  conclusive  upon 
third  persons  who  have  no  notice  of  them  than  are  secret 
limitations  upon  the  usual  powers  of  an  agent.  The  result 
may  be,  therefore,  as  in  the  case  of  agency,  that  a  partner 
may,  by  exceeding  secret  limitations  but  acting  within  the 
usual  powers,  bind  the  firm  to  third  persons,  and,  at  the 

110 


POWERS   OF   PARTNERS.  [§§  150-101. 

same  time,  make  himself  liable  to  his  partners  for  the  loss 
they  may  sustain  b}^  reason  of  his  act.^ 

§  159.  If  no  powers  agreed  upon,  nsnal  powers  im- 
plied.—  If,  however,  the  partners  have  not  expressly  agreed 
upon  the  powers  that  shall  be  exercised  by  each,  then  they 
must  be  taken  as  having  inijiliedly  agreed  that  the  usual  and 
ordinary  powers  of  partners  in  similar  cases  may  be  exer- 
cised. In  this  event,  the  question  as  between  the  partners 
will  be  substantially  the  same  as  between  the  firm  and  third 
persons,  and  the  question  then  arises,  "What  are  the  usual  or 
the  implied  powers  of  a  partner?  As  this  question  is,  there- 
fore, to  be  answered  in  substantially  the  same  way  between 
wli:itever  parties  it  may  arise,  we  will  consider  it,  for  both 
purposes,  under  the  head  of  the  implied  powers  of  partners 
as  respects  third  persons. 

II.  Powers  as  Between  the  Firm  and  Third  Persons. 

§  160.  Of  what  matters  third  persons  nnist  take  no- 
tice.—  It  was  found  in  the  law  of  Agency  that  third  per- 
sons would  not  be  justified  in  proceeding  blindly  upon  the 
assumption  that  an  agent  really  possessed  every  power  which 
he  might  undertake  to  exercise;  but  that  they  must  investi- 
gate his  authority  and  act  in  good  faith  and  with  reasonable 
prudence.  The  same  principle  api)lies  here.  Persons  deal- 
ing with  a  partner  as  such  are  bound  to  determine  the  ex- 
istence of  the  partnership  and  to  take  heed  of  all  limitations 
of  w^hich  the  nature  and  extent  of  the  business  may  give 
notice,  as  well  as  of  those  restrictions  which  are  actually 
brought  to  their  knowledge. 

§  161.  Nature  and  extent  of  business  to  be  observed.— 

The  nature  and  scope  of  the  business  are  therefore  to  be  re- 
garded. It  may  ha  limited  to  a  single  venture  or  transac- 
tion, and  in  such  a  case  limitations  simihir  to  those  imposed 

iSee  Leavitt    v.   Peck  (1819),  3    Vance  v.  Blair  (1849),  18  Ohio,  538, 
Conn.  125,  8  Am.  Dec.  157;  Stone    51  Am.  Dec.  407. 
V.  Wenclover  (1876),  2  Mo.  App.  247; 

111 


§  102.]  LAW    OF    PAETNEESHIP. 

b}'  a  special  agency  must  be  observed.  It  may  be  confined 
to  a  single  line  of  business,  and  in  such  a  case  the  implied 
authority  must  be  limited  by  the  usages  of  that  business, 
unless  the  partners  have,  by  their  words  or  conduct,  given 
it  a  wider  scope.  It  may  be  a  business  of  a  particular  kind, 
as  in  the  case  of  a  professional  partnership,  in  respect  of 
which  the  law  recognizes  but  limited  powers.  Of  all  such 
facts  third  persons  must  take  notice,  and  must  be  bound  by 
the  legal  conclusions  to  be  drawn  from  thera.^ 

§  162.  Same  subject  —  Distinction  between  trading  and 
non-trading  firms. —  Perhaps  the  most  important  distinc- 
tion to  be  observed  as  to  the  nature  of  the  partnership  busi- 
ness is  that  drawn  between  trading  and  non-tradinof  firms. 
"The  test  of  the  character  of  the  partnership,"  it  is  said  in 
a  recent  case,  "  is  buying  and  selling.  If  it  buys  and  sells, 
it  is  commercial  or  trading.  If  it  does  not  buv  or  sell,  it  is 
one  of  employment  or  occupation."  By  this  is  meant,  of 
course,  buying  and  selling  as  a  business,  and  not  as  a  mere 
incident  to  some  other  business  or  occupation.  The  distinc- 
tion is  an  important  one;  for,  as  can  readily  be  seen,  and  as 
will  be  more  fully  observed  hereafter,  much  greater  powers 
may  properly  be  regarded  as  incident  to  a  commercial  or 
trading  business  than  to  one  for  the  exercise  of  a  profession 

1  Whei'e  a  partnership  is  limited  ners  themselves  if  such  persons,  at 

to  a  particular  trade  or  business,  the  time  of  the  dealing,  knew  the 

one  partner    cannot  bind  his  co-  nature  of  such  agreement,  or  had 

partner  by  any  contract  not  relat-  knowledge  of  such  facts  and  cir- 

ing  to  such  trade  or  business,  and  cumstances    relating    thereto    as 

third  persons  will  be  presumed  to  would  lead  a  man  of  common  pru- 

have  knowledge    of    the    limited  dence  to  make  inquiry  abovit  them, 

nature  of  the  partnership  from  cir-  Bromley  v.  Elliott  (1859),  38  N.  H. 

cumstances    connected    with    the  287,  75  Am.  Dec.  183.    To  same  ef- 

business  of  the  firm,     Livingston  feet:   Baxter  v.   Rollins  (1894),  90 

V.  Roosevelt  (1809),  4  Johns.  (N.  Y.)  Iowa,  217,  57  N.  W.  Rep.  838.    See, 

251,  4  Am.  Dec.  273,  1  Am.  Lead,  also,  Wilson  v.  Richards  (1881),  28 

Cas.,  p.  507  and  note.    Persons  deal-  Minn.  337;  Cargill  v.  Corby  (1852), 

ing  with  partners  are  bound  by  15  Mo.  425. 
the  agreement  between  the  part- 

113 


POWERS    OF   PARTNERS.  [§  103. 

or  occupation  merely.    Of  this  distinction  and  its  legal  con- 
sequences third  persons  are  bound  to  take  notice.^ 

In  dealing  with  this  question  in  a  recent  case,'  the  court, 
speaking  of  a  farming  partnership,  said :  "  The  partnership 
in  this  case  is  not  a  trading  or  commercial  one,  which  is  gen- 
erally governed  as  to  its  scope  of  authority  by  the  rules  of 
the  law-merchant,  of  which  the  courts  take  judicial  cogni- 
zance. The  principle  governing  a  non-trading  partnership 
is  well  settled.  There  are  three  classes  of  cases  where  each 
partner  connected  with  such  associations  may  lawfully  bind 
the  firm;  the  burden,  in  each  case,  being  on  the  plaintiff  to 
prove  the  facts  by  which  such  authority  is  established,  or 
from  which  it  may  be  implied:  (1)  AVhere  he  has  exjjress 
authority  to  do  so;  (2)  where  the  contract  made,  or  thing 
done,  is  necessary  in  order  to  carry  on  the  business  of  the 
|)arDnership;  and  (3)  where  it  is  usually  or  customarily  inci- 
dent to  other  partnerships  of  like  nature." 

§  163.  Same  subject  —  The  power  of  a  partner  to  im- 
pose restrictions  by  dissent. —  The  limitations  upon  the 
implied  powers  of  one  partner  may  also  be  increased  in  cer- 
tain cases  by  his  copartner's  dissenting  to  be  bound  by  his 
contemplated  acts.  One  partner  cannot  by  secret  dissent 
impose  limitations  upon  his  partner's  ])ower  to  bind  the  lirm 
to  third  persons;  neither  can  one  partner  by  an  o})en  and 
communicated  dissent,  without  a  dissolution,  deprive  his 
partner  of  those  powers  which  the  partnership  articles  con- 
fer upon  him;  nor  can  he  by  such  dissent  impose  upon  third 
persons  additional  burdens  or  responsibilities,  as,  for  examjile, 
to  take  away  a  debtor's  right  to  pay  to  either  partner;  but 
as  to  the  future  exercise  of  implied  powers,  one  of  two  )»art- 
ners  may,  by  giving  notice  to  third  persons,  prevent  his  being 

♦  See  Lee  v.  First  National  Bank  Conn.  32,  o."»  Am.  Rep.  53;  Smith  v. 
(1890),  45  Kan.  8,  25  Pac  Rep.  190,  Sloan  (1875),  37  Wis.  285,  19  Am. 
11  L.  R  A.  238;  Winsliip  v.  Bank     Rep.  757. 

of  United   States  (18:il),  5  Peters        2  WooiirulT   v.  Scaifc  (1887),    «3 
<U.  a),  529:  Pea.se  v.  Cole  (1>^85),  53    Ala.  15'i 
8  113 


§§  164,  165.]  LAW    OF    PARTNERSHIP. 

bound  by  the  contemplated  act  of  his  partner.^  Whether  the 
same  rule  applies  where  there  are  more  than  two  partners 
will  be  hereafter  considered.- 

§164.  Of  the  partner  as  the  agent  of  the  firm. —  Ap- 
plying these  considerations,  the  general  rule  may  be  said  to 
be  that  each  partner  is  the  agent  of  the  firm  with  implied 
powers  to  bind  the  partnership  in  all  matters  falling  within 
the  general  and  usual  scope  of  the  business  as  actually  con- 
ducted ;  and  that  third  persons  dealing  with  one  partner  as 
such  agent  will  be  protected  if  they  act  in  good  faith,  with 
reasonable  prudence,  and  with  no  notice  of  any  other  limita- 
tions than  those  which  the  nature  of  the  business  as  ostensibly 
carried  on  may  afford. 

Greater  power  may,  of  course,  be  conferred  by  the  express 
or  implied  consent  of  the  partners  previously  given,  or  by 
their  subsequent  ratification ;  but  the  rule  stated  refers  to  the 
authority  to  be  implied  from  the  nature  of  the  business  and 
the  method  of  transacting  it. 

§  165.  Partner  has  no  implied  power  outside  ot  scope 
of  business. —  The  first  and  most  obvious  limitation  imposed 
by  this  rule  is,  that  one  partner  has  no  implied  power  to 
bind  the  firm  in  any  matter  outside  of  the  scope  of  the  busi- 
ness as  ostensibly  carried  on.  Thus,  as  a  few  of  many  simi- 
lar illustrations,  it  is  not  within  the  scope  of  the  business  of 
a  firm  of  lumber  manufacturers  to  subscribe  for  stock  in  a 
plank-road  company ;  nor  of  a  firm  of  millers,  or  planters  and 
farmers,  to  carry  on  a  grocery  store ;  nor  of  an  iron  furnace 
partnership  to  buy  a  distillery ;  nor  of  a  printing  firm  to 
undertake  to  sell  pianos;  nor  of  a  firm  of  millers  and  grain 
dealers  to  speculate  in  futures;  nor  of  a  trading  partnership 

•  Sae   Leavitt  v.   Peck   (1819),   3    v.  Bernheim  (1877),  76  N.  C.  139; 
Conn.  125,  8  Am,  Dec.  157;  Monroe    Johnston  v.  Button  (1855),  27  Ala. 
V.  Conner  (1838),  15  Me.  178.  32  Am.     245;  Wipperman  v.  Stacy  (1891),  80 
Dec.  148;  Noyes  v.  New  Hasten  R.     Wis.  345,  50  N.  W.  Rep.  336. 
R.  Co.  (1861),  30  Conn.  1;  Johnson        '^  See  post,  §  189. 

114 


TOWERS    OF    PARTNERS.  [§§  106,   107. 

to  collect  accounts  for  others,  or  buy  land  for  s])eculation.i 
Other  illustrations  will  be  given  under  special  heads. 

§  166.  What  meant  by  scope.— AVhat  is  meant  by  the 
scope  of  the  business  is  not  capable  of  exact  definition,  but, 
in  general,  it  means  the  limits  commonly  and  usually  fixed 
to  a  similar  business  at  that  time  and  place,  and  reasonably 
necessary  to  enable  that  business  to  be  carried  on.  The 
usages  of  those  engaged  in  the  same  business  at  the  same 
time  and  place  are  therefore  material  to  be  observed  as  indi- 
cating not  only  what  the  partners  themselves  but  third  ]ier- 
sons  must  have  contemplated  as  falling  properly  within  its 
purpose.  The  previous  practice  and  conduct  of  the  particular 
firm  may  also  be  of  weight  as  indicating  what  the  partners 
have  determined  to  be  authorized.  Necessity  alone  is  not 
enough,  nor  is  the  fact  that  benefit  may  have  resulted  from 
the  act;  it  must  fall  within  the  usages  of  such  a  business,  or 
at  least  within  the  usages  of  the  particular  business. 

Scope  is  usually,  perhaps,  a  question  of  fact  to  be  deter- 
mined by  evidence  of  the  circumstances,-  but  there  are  many 
cases  in  which  the  courts  may  determine,  as  matter  of  law, 
that  a  given  act  is  not  within  the  scope  of  a  particular  busi- 
ness.' 

§  167.  Extending  original  scope  by  snbseqnent  con- 
duct.—The  scope  originally  fixed  by  the  ])artners  for  the 
conduct  of  their  business  may  be  subsequently  eidai-ged  with 
their  consent.  This  consent  may  be  given  consciously  and 
expressly,  or  it  may  be  given,  perhajis  unconsciously,  by  ac- 
quiescence or  implication.     As  the  scoi)e  of  the  business  is 

iSee  Barnard  v.  Plank-road  Co.  59  Miss.  21(5:  Brooks  v.  Hamilton 

(1859),  C  Mich.  274;  Banner  Tobacco  (1821),  10  Mart.  (La.)  283,  13  Am. 

Co.  V.  Jenison  (1882;,  48  Mich.  459;  Dec.  328. 

Irwin  V.  Williar  (1883),  110  U.  S.        2  See  Loudon  Savings  Society  v. 

499;  Boardman  v.  Adams  (1857),  5  Savings  Bank  (1800).  3(J  Pa.  S(.  498, 

Iowa,  224,  Paige's  Partn.  Cas.   120;  78  Am.  Dec.  390. 
Humes  v.  O'Bryan  (1883),  74  Ala.        3  See  Banner  Tohucco  Co.  v.  Jeni- 

64;  Waller  v.  Keyes  (1834),  6  Vt.  son  (1882),  48  Mich.  459,  12  N.  W. 

257;  Pickels  v.  McPherson  (1881),  Rep.  655. 

115 


§§  168,  169.]  LAW    OF   PAKTNEKSHIP. 

extended,  the  range  of  the  implied  powers  of  the  partners 
extends  accordingly.  As  was  said  in  one  case  ^  in  which  a 
firm  of  printers  had  gradually  added  piano  selling  to  their 
business,  "  Where  a  partnership  firm,  embarked  in  a  partic- 
ular business  to  which  their  engagements  are  confined,  and 
to  which  alone  their  partnership  contracts  extend,  by  mut- 
ual agreement  enlarge  the  sphere  of  their  operations  and  in- 
clude another  branch  of  business,  the  power  of  each  partner 
to  bind  the  firm  by  his  contracts  is  co-extensive  with  the 
whole  business  of  the  partnership;  and  the  acts  of  each 
member  are  as  binding  on  the  firm  in  the  new  branch  of 
business  in  which  they  are  engaged  as-they  are  in  the  former 
regular  and  ordinary  business." 

§  168.  Consideration  of  particular  powers.— It  is  obvi- 
ously impossible  to  enumerate  all  of  the  poAvers  which  may 
or  may  not  fall  within  the  scope  of  a  particular  partnership; 
but  the  question  of  the  existence  of  several  has  so  frequently 
arisen  that  they  may  be  grouped  together  as  further  illus- 
trations of  the  subject.     Thus  — 

§  169.  Admissions.—  The  statements,  representa- 
tions and  admissions  of  one  partner  are  not  admissible 
against  another,  unless  he  has  in  some  way  assented  to  them, 
either  to  prove  the  partnership  or  to  prove  that  a  given 
transaction  was  a  partnership  transaction ;  but  if  the  exist- 
ence of  the  partnership  has  been  established  by  other  evi- 
dence, then  the  admissions  of  one  partner  made  during  the 
continuance  of  the  partnership,  while  engaged  in  the  trans- 
action of  the  partnership  business  and  in  reference  to  part- 
nership affairs,  are  admissible  against  the  firm.  One  partner 
cannot,  however,  by  his  admissions  or  declarations  alone,  de- 
prive his  partners  of  their  interests  in  the  firm  property.^ 

iBoardman  v.  Adams  (1857),  5  Am.  Dec.  53;  Griswold  v.  Haven 
Iowa,  224,  Paige's  Partn.  Cas.  120.     (1862),  25   N.  Y.  595,  82  Am.  Dec. 

2 See  Drumright  V.  Philpot  (1854),  380;  Williams  v.  Lewis  (1888),  115 
16  Ga.  434,  60  Am.  Dec.  738;  Bur-  Ind.  45,  17  N.  E.  Rep.  262,  7  Am.  St. 
gan  V.  Lyell  (1851),  2  Mich.  102,  55    Rep.  403;  Strong  v.  Smith  (1892),  63 

116 


POWERS   OF   PAETXEKS.  [§§  170-172. 

"Where  it  is  desired  to  prove  by  one  partner  either  the  ex- 
istence of  the  partnership  or  who  were  the  partners  com- 
posing it,  he  should  be  called  as  a  witness.  While  his  extra- 
judicial admissions  are  not  admissible,  his  testimomj  on  the 
trial  is  competent.^ 

§170.  Appointing  agents.— Each  partner  has  im- 
plied authority  to  employ  such  agents  and  servants  as  the 
proper  transaction  of  the  partnership  may  require.'^ 

The  firm  may  act  as  agent.  Where  the  partners  are  ap- 
pointed as  individuals,  all  must  ordinarily  unite  in  executing 
the  authority ;  but  where  the  firm  is  the  agent,  any  ])artner 
has  implied  power  to  execute  the  authority  aloue.^ 

§  171.  Arbitration.— One  partner  has  no  implied 

power  to  submit  controverted  partnership  matters  to  arbitra- 
tion. This  is  the  prevailing  rule  whether  the  agreement  to 
submit  is  under  seal  or  not,  though  in  a  few  states  an  un- 
sealed agreement  by  one  partner  has  been  held  binding. 
The  power  may,  of  course,  be  conferred  by  the  consent  of 
the  other  partners.* 

§  172.  Assignments  for  cre«litors. — By  the  weight 

of  authority  it  is  settled,  as  a  general  rule,  that  one  i)artner 
has  no  implied  power  to  make  a  general  assignment  of  the 
partnership  property  for  the  benefit  of  partnership  credit- 
ors, though  it  will  be  valid  if  the  other  partners  previously 
consent,  either  expressly  or  impliedly,  or  subsequently  ratify 

Conn.  39,  25  Atl.   Rep.  395:  First  37  Minn.  101,  33  N.  W.  Rep.  318,  5 

Nat.   Bank    v.   Conway  (1886),   67  Am.  St.  Rep.  827;  Frost  v.  Eratli 

AVis.  210,  30  N.  W.  Rep.  215.  Cattle   Co.   (1891),  81   Tex.  505,  17 

'  See  First  Nat.  Bank  v.  Conway,  S.  W.  Rep.  52,  20  Am.  St.  Rep.  831. 

sJipra.  iHee    Fancher    v.   Furnace    Co. 

'     2  See  Mead  v.  Shepard  (1867),  54  (1886),  80  Ala.  481,  2  So.  Rej).  26H; 

Barb.    (N.    Y.)    474;     Sweeney    v.  Walker  v.  Bean   (1886),  34  Jliiin. 

Neely  (1884),  53  Mich.  421;  Harvey  427,  26  N.   W.   Rejx   232;    Gay   v. 

V.  McAdams  (1875),  32  Mich.  472;  Waltman    (1879),   89    Pa.   St.   453; 

Carley  V.  Jenkins  (1874),  46  Vt.  721,  Davis   v.    Bcrj^er   (1884),   54   Midi. 

3  See  Deakin  v.  Underwood  (1887),  652,  20  N.  W.  Rep.  029. 

117 


§§  173,  174.]  LAW    OF    PARTNERSHIP. 

it.  To  this  general  rule  one  exception  is  made:  that  if  the 
other  partners  have  absconded  or  are  absent  so  that  they 
cannot  be  consulted,  or  are  otherwise  incapable  of  assenting 
or  dissenting,  then  one  partner  may  make  such  an  assign- 
ment without  their  consent.^ 

§  173. Attorneys. —  One  partner  has  implied  author- 
ity to  employ  attorneys  to  appear  and  represent  the  firm  in 
suits  to  which  the  firm  is  a  party.^ 

§  174. Bills  aud  notes. —  The  implied  power  of  one 

partner  to  bind  the  firm  upon  negotiable  paper  depends 
largely  upon  the  trading  or  non-trading  character  of  the 
firm. 

1.  In  the  case  of  a  trading  firm,  each  partner  has  implied 
authority  to  bind  the  firm  by  making,  accepting  or  indors- 
ing, in  its  name,  and  in  the  course  of  its  business,  a  bill  or 
note  for  partnership  purposes;  and  negotiable  paper  exe- 
cuted in  the  firm  name  by  one  partner  in  a  trading  firm  will, 
iwima  facie,  be  presumed  to  bind  the  firm.  But  if  the  bill 
or  note  was  not  for  partnership  purposes,  but  was  really  in 
fraud  of  the  firm  — as  if  it  were  given,  without  the  other 
partners'  consent,  for  the  individual  debt  or  purposes  of  one 
partner, —  it  would  not  bind  the  firm  in  the  hands  of  the 
original  payee  or  of  any  other  person  who  had  notice  of  this 
fact,  or  who  did  not  pay  value  for  it.  In  the  hands  of  a 
honafide  holder  for  value  without  notice,  however,  it  would 
be  binding  upon  the  firm,  and  the  latter  would  have  re- 
coarse  against  the  partner  giving  it.  The  original  payee  of 
pa]')er  given  for  the  individual  debt  of  the  partner,  or  any 
other  holder  having  notice  of  that  fact,  can  only  recover  of 

1  See  Loeb  v.  Pierpoint  (1882),  58  iams  v.  Frost  (1880),  27  Minn.  255, 

Iowa,  469,  43  Am.  Rep.  122;  Shat-  Paige's    Partn.   Cas.    128;    Hill  v. 

tuck  V.  Chandler   (1889),  40   Kan.  Postley  (1893),  90  Va.  200,  17  S.  E. 

516,  10  Am.  St.  Rep.  227;  Sullivan  Rep.  946:  Mayer  v.  Bernstein  (1891), 

V.   Smith   (1884),   15    Neb.   476,   48  69  Miss.  17. 

Am.  Rep.  354;  Rumery  v.  McCul-        2  See  Wheatley  v.  Tutt  (1867),  4 

loch  (1882),  54  Wis.  565;  Stein  v.  Kan.    240;     Charles    v.    Eshleman 

La  Dow  (1868),  13  Minn.  412;  Will-  (1879),  5  Col.  107. 

118 


POWERS    OF   PARTNERS. 


[§  174. 


the  firm  by  showing  aifirmatively  that  the  other  partners 
previously  authorized  or  subsequently  ratified  its  execution.^ 
2.  In  the  case  of  a  non-trading  Jirm^  however,  one  partner 
has,  by  the  weight  of  authority,  no  implied  power  to  bind 
the  firm  by  making,  accepting  or  indorsing  negotiable  paper, 
even  though  it  was  done  in  the  scope  of  the  partnership  busi- 
ness and  for  its  benefit.  In  such  partnershi[)s  the  power  to 
malie  negotiable  paper  can  only  exist  by  virtue  of  the  con- 
sent of  the  partners,  the  necessity  of  the  case,  or  usage  in 
that  or  similar  firms.  Such  paper  is  thei'efore  unenforceable 
not  only  in  the  hands  of  the  original  payee,  but  also  of  a 
honafide  holder  for  value,  because  the  nature  of  the  business 
is  notice  to  every  one  of  the  limited  powers  of  the  partners. 
A  fortiori  could  neither  the  original  payee  nor  a  honafide 
holder  recover  if  the  paper  were  giveu  for  the  individual 
debt  of  a  partner.  To  enable  any  person  to  recover,  there- 
fore, upon  negotiable  paper  given  by  a  partner  in  a  non- 
trading  firm,  the  ])laintiff  must  be  prejiarcd  to  show  either 
such  consent  of  the  other  partners,  such  necessity,  or  such 
usage  as  will  take  the  case  out  of  the  general  rule.- 


'  See  Redlon  v.  Churchill  (1882), 
73  Me.  146,  40  Am.  Rep.  345;  Me- 
chanics' Ins.  Co.  V.  Richardson 
(1881),  33  La.  Ann.  1308,  39  Am. 
Rep.  290;  Sherwood  v.  Snow  (1877), 
46  Iowa,  481,  26  Am.  Rep.  155; 
Howze  V.  Patterson  (1875).  53  Ala. 
205,  25  Am.  Rep.  607;  Walsh  v. 
Lennon  (1881),  98  111.  37,  38  Am. 
Rep.  75. 

-See  Pease  v.  Cole  (1885),  53  Conn. 
53,  55  Am.  Rep.  53;  Smith  v.  Sloan 
(1875).  37  Wis.  285,  19  Am.  Rop.  757; 
Pooley  V.  Wliitmore  (1 873),  1 0  lleislc. 
(Tcnn.;  629,  27  Am.  Rep.  733;  Judge 
V.  Braswell  (1875),  13  Bush  (Ky.), 
67.  26  Am.  Rep.  185;  Lee  v.  First 
National  Bank  (1890),  45  Kan.  8.  11 
L.  R.  A.  238;  Levi  v.  Latiiam  (1884), 
15  Neb.  5(J9,  48  Am.  R^^j).  361 ;  Fri.-nd 

1 


V.  Duryee  (1879),  17  Fla.  Ill,  35  Xm. 
Rep.  89:  Harris  v.  Baltimore  (1890), 
73  Md.  22,  25  Am.  St.  Rep.  565,  8  L. 
R.  A.  677. 

This  rule  has  been  applied  to 
partnersliips  carrying  on  the  real 
estate,  loan  and  insurance  business, 
Lee  V.  First  National  Bank,  supra; 
Deardorf  v.  Thaclier,  78  Mo.  128, 
47  Am.  Rep.  95;  milling,  Lanier  v. 
McCabe,  2  Fla.  82.  48  Am.  Dec  173; 
water-works,  Broughton  v.  Man- 
chester Waterworks,  3  Barn.  & 
Aid.  1;  gas  works,  Biamah  v.  Rob- 
erts, 3  Biiig.  N.  C'as.  963;  i)rinting 
and  publishing, Pooley  v.Wliitmore, 
supra;  Bays  v.  Conner,  105  Ind. 
415;  j)lanting.  Prince  v.  Crawfcn-d, 
50  Miss.  344;  (aruiing.  (Jreenslade 
V.  Dower,  7  Bani.  &  Cr.  635;  Walker 
19 


§§  ns,  1T6.] 


LAW    OF   PARTNERSHIP. 


§175. 


Rorrowfu^  money. —  The  power  to  borrow 


money  rests  upon  substantially  the  same  considerations  as 
the  power  to  execute  negotiable  paper,  and  is  usually  exer- 
cised with  it.  In  a  trading  firm  the  power  impliedly  exists 
for  partnership  purposes,^  but  not,  it  is  said,  in  a  non-trading 
firm.^  In  the  latter  case  it  can  be  justified  only  by  prior 
authority,  necessity  or  subsequent  ratification.  If  the  bor- 
rowing was  authorized,  the  firm  is  bound  though  the  partner 
misappropriates  the  money. 


§  176. 


Buying. —  The  distinction  between  trading 


and  non-trading  firms  is  material,  but  not  conclusive  as  to 
the  implied  power  to  buy.  In  the  case  of  the  trading  firm, 
whose  business  it  is,  in  whole  or  in  part,  to  buy  goods  for 
use  or  sale,  the  power  of  each  partner  to  buy  such  goods 
must  clearly  be  implied.  It  must  also  be  implied  in  the 
case  of  a  non-trading  firm  if  the  purchase  is  within  the  scope 
of  the  business  as  actually  conducted.^ 


V.  Walker  (1894),  66  Vt.  285,  29  Atl. 
Rep.  146;  keeping  a  tavern,  Cocke 
V.  Branch  Bank,  3  Ala.  175;  carry- 
ing on  a  theater,  Pease  v.  Cole, 
supra;  operating  a  threshing  ma- 
chine, Horn  V.  City  Bank,  32  Kan. 
518;  keeping  livery-stable,  Levi  v. 
Latham,  siqiva;  carrying  on  a  laun- 
dry, Neale  v.  Turton,  4  Bing.  149; 
digging  tunnels,  Gray  v.  Ward,  18 
III.  32;  practicing  law.  Friend  v. 
Duryee,  supra;  or  medicine,  Cros- 
thwait  v.  Ross,  1  Humph,  (Tenn.) 
23,  34  Am.  Dec.  613;  sawing  lum- 
ber, Dowling  V.  National  Bank 
(1891),  145  U,  S.  512,  36  L.  ed.  795, 
12  Sup.  Ct.  Rep.  928;  building, 
Sniveley  v.  Matlieson  (1895),  12 
Wash.  88,  40  Pac.  Rep.  628. 

1  See  Rothwell  v.  Humphreys 
(1795),  1  Esp.  406,  Ames'  Cas.  on 
Partn.  535,  and  note;  Howze  v. 
Patterson  (1875),  53  Ala.  205,  25 
Am.  Rep.  607;    Walsh  v.  Lenuon 


(1881),  98  111.  27,  38  Am.  Rep.  75: 
Sherwood  v.  Snow  (1877),  46  Iowa, 
481, 26  Am.  Rep.  155;  Harris  v.  Bal- 
timore (1890),  73  Md.  22,  25  Am.  St. 
Rep.  565,  8  L.  R.  A.  677;  Gilchrist 
V.  Brande  (1883).  58  Wis.  184;  Col- 
ler  V.  Porter  (1891),  88  Mich.  549,  50 
N.  W.  Rep.  658. 

2  But  see  Hoskinson  v.  Eliot  (1869), 
62  Pa.  St.  393;  Leffler  v.  Rice  (1873), 
44  Ind.  103. 

3  See  Bond  v.  Gibson  (1808),  1 
Camp,  185,  Ames'  Cas.  on  Partn, 
537,  and  note;  Lynch  v,  Thompson 
(1883),  61  Miss,  354;  Stillman  v. 
Harvey  (1879),  47  Conn,  27;  John- 
ston V,  Trask  (1889),  116  N,  Y,  136, 
22  N.  E.  Rep.  377,  15  Am,  St,  Rep. 
394,  5  L.  R.  A.  630;  Porter  v.  Curry 
(1869),  50  111.  319,  99  Am.  Dec,  520: 
Davis  V,  Cook  (1879),  14  Nev,  265: 
Kenney  v,  Altvater  (1874),  77  P;;. 
St.  34. 


120 


POWERS    OF   PARTNERS.  [§§  177-179. 

The  purchase  may  be  on  credit,  and  may  be  of  either  real 
or  personal  property  within  the  limits  stated. 

If  the  power  exists,  the  firm  is  none  the  less  bound  because 
the  partner  buying  subsequently  misa])plied  the  goods. 

An  unauthorized  purchase  may,  of  course,  be  ratified  by 
the  other  partners. 

§177.  Collecting  and  receiving  payment. —  Every 

partner  in  a  firm,  whether  trading  or  non-trading,  has  im- 
]>lied  authority  to  receive  payment  of  debts  and  other  obli- 
gations due  to  the  firm,  and  to  give  receipts  or  discharges 
therefor.^  He  may  take  a  bill  or  note  in  pa3''raent,^  though 
he  cannot  ordinarily  take  goods  unless  that  is  customary,' 
and,  of  course,  he  cannot  accept  his  own  outstanding  note  in 
payment,  or  offset  the  firm  debt  against  one  of  his  own,  or 
accept  goods  for  himself  in  payment  of  the  debt  due  to  the 
firm.^ 

§  178.  Compromising  debts. —  A  partner's  power  to 

bind  the  firm  by  the  compromise  of  a  debt  due  to  it  is  fre- 
quently laid  down  in  general  terms,  but  it  is  certainly  not 
without  hmitation,  and  must,  at  least,  be  exercised  without 
fraud  or  collusion,  in  good  faith  and  with  reasonable  pru- 
dence.^ 

§  170.  Confessing  jndgnient. —  One  partner  has  no 

implied  power  to  confess  judgment  or  to  give  a  warrant  of 

1  Allen    V.   Farrington    (1855).   2  (111.),  143,  12  Am.  Dec.  151:  Warder 

Sneed(Tenn.).  526;  Major  v.Havvkes  v.    Newdigate    (1851),    11    B.   Mon. 

( 1850),  12  111.  298;  Prentice  v.  Elliott  (Ky.)  174,  52  Am.  Doc.  56G;  Far  well 

(188:}),  72  Ga.  154;  Salmon  v.  Davis  v.  St.  Paul  Trust  Co.  (1891),  45  Minn. 

(1812),  4  Binn.  (Pa.)  375,  5  Am.  Dec.  495,  48  N.  W.  Rep.  320.  22  Am.  St. 

410;  Moist's  Appeal  (1873),  74  Pa.  Rep.  742. 
St.  100.  *See  1  Lindlcy  on    Partiicrsliip, 

^Heartt  v.  Walsh  (1874).  75  111.  130;    Pierson   v.  HooUer  (180S).   3 

200.  Johns.  (N.  Y.)  08,  3  Am.  Dec.  407; 

:iLee  V.  Hamilton  (1854),  12  Tex.  Noyes   v.   Railroad    Co.   (1801).   30 

413.  Conn.  1;  llaun  v.  Land  Co.  (1887), 

^  Gregg  V.  James  (1825),  Breese  74  Cal.  418.  10  I'uc.  Rl'p.  190. 

131 


§§  180,  181.]  LAW    OF   PARTNERSHIP. 

attorney  to  confess  judgment  against  the  firm  upon  a  debt 
due  by  it,  though  the  judgment  may  be  valid  against  the 
partner  as  an  individual.^ 

g  180.  Deeds  and  iustruments  under  seal.— It  is  a 

general  rule  that  one  partner  has  no  implied  authority  to 
bind  the  firm  by  deed,  bond,  mortgage  or  other  instrument 
under  seal;  though  the  partner  executing  it  may  thereby 
bind  himself  in  many  cases,  either  upon  the  instrument  itself 
or  upon  an  implied  warranty  of  authority.  To  sustain  such 
instruments  against  the  firm,  when  executed  by  a  single 
partner,  the  previous  authorization  or  subsequent  ratifica- 
tion by  the  firm  must  be  shown.-  Contrary  to  the  rule 
usually  applicable  in  such  cases,  this  authorization  or  ratifica- 
tion may  be  effected  by  parol.^ 

A  release  of  a  firm  obligation  is  an  exception  to  this  rule 
forbidding  the  execution  of  sealed  instruments ;  and  in  any 
case  an  act  unnecessarily  done  under  seal  may,  if  otherwise 
valid,  be  sustained  by  the  rejection  of  the  seal  as  surplusage.* 

§  181.  Hiring  property. —  One  partner  has  implied 

power  to  bind  the  firm  by  contracts  for  the  hiring  of  such 
property  as  the  usual  prosecution  of  the  firm  business  re- 
quires. Thus,  for  example,  one  partner  may  bind  the  firm 
by  a  contract  for  the  lease  of  premises  on  Avhich  to  carry  on 

1  See  Hier  v.  Kaufman  (18—),  134  26  Vt.  154,  60  Am.  Dec.  303;  Rus- 
111.  215,  25  N.  E.  Rep.  217;  North  v.  sell  v.  Annable  (1871),  109  Mass.  73, 
Mudge  (1862),  13  Iowa,  496,  81  Am.  12  Am.  Rep.  665;  Hull  v.  Young 
Dec.  441;  Morgan  v.  Richardson  (1889),  30  S.  C.  121,3  L.  R.  A.  521. 
(1852),  16  Mo.  409,  57  Am.  Dec.  235;  3  Tischler  v.  Kurtz  (1895),  35  Fla. 
Soper  V.  Fry  (1877),  37  Mich.  236.  323,  17  So.  Rep.  661. 

In     Pennsylvania,     see    Boyd    v.  *  Edwards  v.  Dillon  (1893),  147  111. 

Thompson  (1893),  153  Pa.  St.  78,  25  14,  35  N.  E.  Rep.  135,  37  Am,  St. 

Atl.  Rep.  769,  34  Am.  St.  Rep.  685.  Rep.    199;    Hocking  v.    Hamilton 

In  Virginia,  see  Alexander  v.  Alex-  (1893),  158  Pa.  St.  107.  27  Atl.  Rep. 

ander,  85  Va.  353:  and  in  Louisiana,  836;  Price   v.    Alexander   (1850),  2 

see  Wilmot  v.  The  Ouachita  Belle,  Greene  (Iowa),  437,  52  Am.  Dec.  520: 

32  La.  Ann.  607.  Skinner  v,  Dayton  (1822),  19  Johns. 

2  McDonald  v.  Eggleston  (1853),  (N.  Y.)  513,  10  Am.  Dec.  286. 

123 


POWERS    OF    PARTXERS.  [§§  1S2,  1S3. 

the  business  of  the  firm,^  or  for  the  hirinof  of  horses  neces- 
sary for  the  conduct  of  the  partnership  affairs.- 

§  18*2.  Insurance. —  One  partner  has  implied  power 

to  bind  the  firm  by  contracts  for  the  insurance  of  the  part- 
nership property.^  In  case  of  loss,  his  power  extends  to  the 
settlement  of  the  loss  with  the  insurance  company.^  He 
may  also  bind  the  firm  by  consenting  to  the  cancellation  or 
surrender  of  a  policy.^ 

§  183.  Mortgages  and  pledges. —  Tlie  power  of  one 

partner  to  pledge  or  mortgage  the  personal  property  of  the 
firm  to  secure  money  borrowed  seems  to  be  co-extensive 
with  the  power  to  borrow.  In  respect  of  mortgages  and 
pledges  to  secure  partnership  indebtedness,  the  authorities 
are  not  in  harmony,  but  the  prevailing  rule  is  that  one  part- 
ner has  the  implied  power  to  mortgage,  certainly  part,  and 
usually  all,  of  the  property  of  the  firm  kept  for  sale,  to  se- 
cure the  pa^^ment  of  the  firm  debts.  As  to  that  not  kept 
for  sale,  the  power  to  mortgage  it  all  would  seem  to  be  sub- 
ject to  the  same  limitations  as  the  power  to  assign  for  the 
benefit  of  creditors.* 

But  one  partner  has,  of  course,  no  implied  power  to  pledge 
or  mortgage  the  partnershij)  property  to  secure  his  own  pri- 

1  Seaman  V.  Ascherman  (1883),  57  375;   Donald   v.  Hewitt  (1859),   33 

Wis.  547,  15  N.  W.  Rep.  788;  Still-  Ala.  534,  73  Am.  Dec.  431;  Robards 

man  v.  Harvey  (1879),  47  Conn.  2G;  v.  Waterman  (1893),  96  Mich.  233, 

Smith  V.  Cisson  (1867),  1  Colo.  29.  55  N.  W.  Rep.  662;  Hage  v.  Camp- 

■i  Sweet  V.  Wood  (1893),  18  R.  I.  bell  (1891),  78  Wis.  572,  47  N.  W. 

386,  28  Atl.  Rep.  335.  Rep.  179,  23  Am.  St.  Rep.  422;  Cit- 

■*  Hooper  v.  Lusby  (1814),  4  Camp,  izens'  Nat.  Bank  v.  Jolmson  (1890), 

66;  Peoria  Ins.  Co.  v.  Hall  (1864),  79  Iowa,  290,  44  N.  W.  Re{).  551; 

12  Mich.  202.  McCarthy  v.  Seisler  (IHUl),  130  In.l. 

4  Brown    v.    Hartford     Ins.    Co.  63,  29  N.  E.  Rep.  407;    Pliillips  v. 

(1875),  117  Mass.  479.  Furniture  Co.  (1890),  86  Ca.  61)1),  i;! 

•^Hillock    V.    Traders'    Ins.     Co.  S.  E.  Rep.  19;  llorton  v.  Bh)L'<lurn 

(1884),  54  Mich.  531,  20  N.  W.  Rep.  (1893),  37  Neb.  666,  56  N.  W.  Rep. 

571.  321 ;  Letts-FIetclier  Co.  v.  McMaster 

«8ee  Tapley  v.  Butterfield  (1840),  (1891),  83  Iowa,  449,  49  N.  W.  Rc-p. 

1   Mete.  (Mass.)  515,  35  Am.  Dec.  1035. 

123 


§§  1S4-1S6.]  LAW   OF   PARTNERSHIP. 

vate  debts.,  and  of  this  the  party  taking  it  presumptively  has 
knowledge.^ 

§  184-.  Notice. —  Notice  to  or  knowledge  of  one  part- 
ner in  relation  to  partnership  matters  is,  in  general,  notice 
to  or  knowledge  of  the  firm.^  Although  not  all  of  the  ques- 
tions have  arisen  in  partnership  cases,  the  rules  applicable 
in  agency  would  doubtless  apply,  ^.  «.,  that  the  notice  or 
knowledge  must  have  been  acquired  in  relation  to  the  part- 
nership business  and  either  during  the  partnership  or  so 
soon  before  its  creation  that  the  partner  receiving  the  notice 
then  remembered  or  must  be  presumed  to  have  remembered 
it.^  The  exceptions  to  the  general  rule  would  also  doubt- 
less apply  here  if  the  partner  w^ere  really  acting  adversely 
or  were  'colluding  with  the  party  claiming  the  benefit  of  the 
notice,  to  defraud  the  firm.* 

§  185.  Payments. —  Each  partner  has  implied  power 

to  pay  the  firm  debts  out  of  the  firm  funds;  and  he  may  sell 
or  transfer  the  firm  property  in  payment  of  firm  debts  under 
the  same  conditions  that  he  might  pledge  or  mortgage  it  for 
the  purpose  of  securing  their  payment.^  He  has  no  implied 
authority,  of  course,  to  pay  his  private  debt  with  partnership 
funds,  and  cannot  transfer  partnership  property  in  satisfac- 
tion of  such  a  debt.* 

§  186. Sales. —  Each  partner  has  implied  authority 

to  sell,  assign  or  dispose  of,  in  the  regular  course  of  business, 

1  See  Oliphant  v.  Markham  (1891),  (1813),  1  Maule  <&  Sel.  255;  Ex  parte 
79  Tex.  543,  15  S.  W.  Rep.  569,  33    Heaton,  Buck,  386. 

Am.  St.  Eep.  363.  5  See  Ullman  v.  Myrick  (1890),  93 

2  See  Tucker  v.  Cole  (1882).  54  Ala.  532,  8  So.  Rep.  410;  Johnson  v. 
Wis.  539;  Holton  v.  McPike  (1881),  Robinson  (1887),  68  Tex.  399,  4  S.  W. 
27  Kan.  286;  Herbert  v.Odlin  (1860),  Rep.  625;  Hanchett  v.  Gardner 
40  N.  H.  267;  Howland  v.  Davis  (1891),  188  111.  571,  28  N.  E.  Rep.  788. 
(1879),  40  Mich.  546.  6  See  Cannon  v.  Lindsey  (1887). 

3SeeMechem  on  Agency,  g§  718-    85  Ala.  198,  3  So.  Rep.  676.  7  Am. 

723.  St.   Rep.   38;   Janney   v.   Springer 

4  See     Bignold     v.     Waterhouse    (1889),  78  Iowa,  617,  43  N.  W.  Rep. 

461,  16  Am.  St.  RejD.  460. 
134 


POWERS    OF    PAKTXERS.  [§  187. 

SO  much  of  the  partnership  property  as  is  designed  for  sale, 
even  though  it  be  the  whole  property  of  the  firm,  and  may 
pass  the  entire  title  to  it.  He  may  also  sell  or  transfer,  in 
the  course  of  the  business,  choses  in  action  and  other  intan- 
gible pro])erty  of  the  firm,  such  as  its  accounts  and  bills 
receivable,  patent-rights,  and  the  like.  And  upon  the  sale 
he  may  give  such  warranties  of  title  or  quality,  or  may  make 
such  incidental  contracts  in  relation  thereto,  as  are  usually 
made  in  like  cases.^ 

The  implied  power  of  one  partner  to  sell  the  entire  prop- 
erty of  the  firm  is,  by  the  weight  of  authority,  limited  to 
that  kept  for  sale,  and  does  not  include  the  power  to  sell  that 
kept  for  the  purposes  of  carrying  on  the  business.^ 

§  187.  —  Suits  at  law.— "A  partner  may  sue  in  the 
name  of  himself  and  copartners  without  their  consent,"  says 
Mr.  Justice  Lindley,"  "but  if  he  sues  against  their  consent 
he  must  indemnify  them  against  the  costs.  So  one  partner 
may  defend  an  action  brought  against  the  firm,  indemnify- 
ing the  firm  against  the  consequences  of  so  doing  if  he  acts 
against  the  will  of  the  other  partners."  If  the  firm  is  sued, 
one  partner  may  employ  an  attorney  who  may  enter  the 
appearance  of  the  firm  as  such,  though  probably  not  of  the 
other  partners  as  individuals.* 

For  trespasses  and  other  similar  acts  committed  by  one 
partner  in  attempting  to  enforce  partnership  demands  by 
legal  process,  the  firm  will  ordinarily  be  liable.^    Even  fo'r 

1  See  Ellis  V.  Allen  (1886),  80  Ala.  ell's  2d  Am.  eel.),  271.  See,  also, 
515,  2  So.  Rep.  67G;  Crites  V.Wilkin-  Kuhn  v.  Weil  (1880),  73  Mo.  213; 
son  (1884),  65  Cal.  559,  4  Pac.  Rep.  Ward  v.  Barber,  1  E.  D.  Sniitli  (n! 
567;  First  Nat>  Bank  v.  Freeman  Y.),  423. 

(1882),  47  Mich.  408;  Schneider  v.  <Soe  Phelps  v.  Brewer  (1852)*  9 

Sansom  (1884),  62  Tex.  201.  Cush.  (Mass.)  390,  57  Am.  Dec.  56; 

2  See  Lowman  v.  Sheets  (1890),  Haslet  v.  Street  (1823),  2  McCord 
124  Ind.  417,  24  N.  E.  Rep.  351,  7  L.  (S.  G),  810,  18  Am.  Dec.  724,  and 
R.  A.  784;  Wilcox  V.  Jackson  (1884),  note;  Hall  v.  Lanning  (1875),  91 
7  Colo.  521,  4  Pac.  Rep.  906;  Cayton  U.  S.  IGO,  23  L.  ed.  271;  Bennett  v. 
V.  Hardy  (1858),  27  Mo.  536.  Stickney  (1845),  17  Vt.  531. 

»1  Liudley  on  Partnership  (Ew-        ^See  Harvey  v.  Adams  (1875),  83 

125 


§§  188,  189.]  LAW    OF    PARTNEKSniP. 

the  malicious  acts  of  one  partner,  the  others  may  be  liable 
if  they  co-operate  in  them  or  subsequently  ratify  them; 
though  one  partner  is  not  liable  for  a  malicious  prosecution 
carried  on  by  his  partner  if  he  did  not  know  of  it  or  con- 
sent to  it,  and  no  beuelit  resulted  to  the  11  rm.^ 

§  188.  Suretyship   and   guaranty. —  One  partner 

may  bind  the  firm  upon  a  contract  of  suretyship  or  guar- 
anty for  the  partnership  purposes  and  within  the  scope  of 
its  business^-  but  he  has  no  implied  authority  to  bind  the 
firm  by  contracts  of  guaranty  or  suretyship  either  for  him- 
self individually  or  for  strangers  to  the  firm.^ 

Where  the  indorsement  of  the  firm  name  appears  as  such 
upon  what  is  clearly  the  individual  note  of  the  partner,  it 
is  evidence  of  itself  that  the  firm  name  is  used  for  his  ac- 
commodation, and  the  firm  cannot  be  held  unless  it  author- 
ized it;  but  where  the  instrument  does  not  disclose  that  it  is 
the  individual  obligation  of  one  partner,  as  where  the  note 
of  the  partner  is  made  to  the  firm  and  indorsed  in  its  name 
by  that  partner  for  his  own  benefit,  a  honajide  holder  igno- 
rant of  the  fraud  can  recover,^ 

§  189.  Of  the  powers  of  a  majority.  —  The  extent  to 
which  a  majority  of  the  partners  may  control  the  partner- 
ship afi'airs  is  not  definitely  settled  by  the  authorities.  It 
is  clear,  however,  that  a  majority  cannot,  against  the  dissent 
of  the  minority,  change  the  essential  nature  or  extent  of  the 
partnership  business  as  originally  agreed  upon,  as  to  alter 

Mich.  473;  Rolfe  v.  Dudley  (1885),  St.  Rep.  636:  Andrews  v.  Planters' 

58  Mich.  208,  24  N.  W.  Rep.  657;  Bank  (1846),  7  Smedes  &  Mar.  (Miss.) 

Kuhn  V.  Weil,  supra.  192,  45  Am.  Dec.  300;  New  York, 

1  Rosecrans  v.  Barker  (1885),  115  etc.  Ins.  Co.  v.  Bennett  (1825),  5 
111.  331,  56  Am.  Rep.  169.  Conn.  574,  13   Am.    Dec.  109,  and 

2  See  First  National  Bank  v.  Car-  note. 

penter  (1875),  41  Iowa,  518;  Jordan  <  See  Redlon  v.  Churchill  (1882), 
V.  Miller  (1881),  75  Va.  442;  Wilkins  73  Me.  146,  40  Am.  Rep.  345;  Sher- 
V.  Pearce  (1848),  5  Denio  (N.  Y.),  541.  wood  v.  Snow  (1877),  46  Iowa,  481, 
3 See  Clarke  v.  Wallace  (1891),  1  26  Am.  Rep.  155;  Atlas  Nat.  Bank 
N.  D.  404, 48  N.  W.  Rep.  339,  26  Am.     v.  Savery  (1879),  127  Mass.  75. 

126 


POWERS   OF   PAKTNERS.  [§  190. 

or  amend  the  articles,  reduce  or  increase  the  cai>ital,  embark 
upon  a  new  business,  change  its  location,  alter  the  share  of 
a  partner,  admit  a  new  member,  and  the  like.  If  the}'  do, 
the  dissenting  partners  may  withdraw  from  the  firm.' 

But  as  to  matters  pertaining  merely  to  the  manner  of  con- 
ducting the  business,  and  all  questions  concerning  the  in- 
ternal affairs  of  the  partnership,  it  is  equally  clear  that,  if 
the  articles  do  not  determine  them,  the  partners  themselves 
must  decide,  and  here  the  majority  Avill  prevail.  While  one 
of  two  partners  cannot,  therefore,  prevail  against  the  ex- 
pressed dissent  of  his  partner,  inasmuch  as  each  has  an  equal 
voice,  it  is  held  that  a  majority,  where  there  are  more  than 
two,  can  prevail  as  to  these  incidental  matters,  even  against 
the  dissent  of  the  minority.^ 

§  190.  Ratifieatiou  of  unauthorized  acts. —  The  acts  of 
one  partner  which  may  bind  the  firm  may  be  not  only  those 
which  have  been  previoush^  and  expressly  authorized,  or 
which  are  implied  from  the  mere  existence  of  the  relation, 
but  may  also  be  those  which,  though  unauthorized  when 
done,  have  subsequently  been  ratified  by  the  other  partners. 
Liability  may  thus  be  imposed  either  in  contract  or  in  tort. 
The  occasions  and  conditions  of  ratification  in  these  cases 
are  the  same  as  in  any  other  case  of  agency  —  the  firm  or 
the  other  partners  being  principal,  and  the  partner  acting 
being  agent, —  and  as  the  reader  is  assumed  to  be  familiar 
with  this  subject  from  his  previous  study  of  agenc}'',  no  dis- 
cussion of  it  will  be  attempted  here.^ 

1  See  Const  V.  Harris  (1824),  Turn.  27  Ala.  245;  Staples  v.  Sprague 
&R.  517;  Abbott  V.  Johnson  (1855),  (1883),  75  Me.  458;  Clarke  v.  Rail- 
32  N.  H.  9;  Zabriskie  v.  Railroad  road  Co.  (1890),  136  Pa.  St.  408,  20 
Co.  (1867),  18  N.  J.  Eq.  178,  90  Am.  Atl.  Rep.  562;  tmte,  §  163. 

Dec.  617.  3  See  Mechem  on  Agency,  §§  109- 

2  See  Johnston  v.  Button  (1855),    182. 

127 


CHAPTER  X. 


WHO  ARE  BOUND  BY  THE  ACTS  OF  A  PARTNER. 


§  191.  In  general. 

I.  In  Contract. 

192.  All  partners  bound  by  au- 

thorized contracts. 

193.  Dormant,  secret  and  nom- 

inal partners  bound. 

194.  195.  Liability  of  firm  upon 

contracts    made    by    one 
partner  in  his  own  name. 

196.  -— -  Note  given  by  one  part- 

ner. 

197.  ■' Unknown  partnerships. 

198. Contracts  under  seal, 

199.  — -  Judgment  against  one 

partner. 

200.  Contracts  made  in  individ- 

ual names  of  all  tlie  part- 
ners. 


§  201.  Contracts  where  firm  does 
business  in  name  of  one 
partner. 

202.  Contracts  v.'here  there  are 

two  firms  of  same  name 
with  common  partner. 

203.  Liability  of  partner  who  ex- 

ceeds his  authority. 

XL  In  Toet, 

204.  Firm  liable  for  torts  of  one 

partner  in  scope  of  busi- 
ness. 

205.  When  liable   for  his  mali- 

cious or  penal  act. 

206.  When  liable    for  partner's 

breach  of  trust. 


§  191,  In  general. —  The  question,  who  are  bound  by  the 
acts  of  a  partner,  presents  several  different  aspects.  It  is 
the  question  of  the  rights  and  remedies  of  third  persons 
based  upon  the  act  of  one  or  more  partners.  It  may  arise 
under  varying  circumstances,  as,  for  example,  where  one 
partner  has  assumed  to  bind  the  firm,  but  it  is  claimed  that 
his  act  was  unauthorized;  Avhere  he  apparently  acts  for  him- 
self alone,  but  it  is  claimed  that  the  firm  was  the  real  party ; 
where  certain  persons  were  ostensibly  the  only  partners,  but 
it  is  claimed  that  others  were  also  actually  in  the  firm;  where 
the  act  was  the  making  of  a  contract ;  where  it  was  the  com- 
mission of  a  tort,  and  the  like.     The  most  appropriate  classi- 

128 


AVHO   BOUND    BY    ACTS    OF   PARTNER.       [§§  192,  193. 

fication  of  the  subject  for  our  purpose  is  probably  that  used 
in  Ageucj,  namely,  the  liability  —  1.  In  contract.  2.  In 
tort. 

L  In  Contract. 

§  192.  All  partners  bound  by  authorized  contracts. — 

It  has  been  seen  in  an  earlier  chapter  that  each  partner  is 
the  agent  of  the  firm  with  powers  conferred,  either  expressly 
or  impliedly,  to  bind  the  firm  as  its  agent.  It  follows,  there- 
fore, that  whenever  a  partner  makes  a  contract  for  the  firm, 
and  in  its  name,  within  the  limit  of  his  express  or  implied 
authority  as  a  partner,  he  binds  the  firm  and  all  members  of 
it.  It  is  immaterial,  in  this  connection,  whether  the  other 
partners  knew  of  the  act  or  not;  or,  in  the  case  of  implied 
powers,  whether  they  had  previously  consented  to  it  or  not; 
or  whether  it  was,  or  was  not,  a  violation  of  their  agree- 
ment between  themselves.  The  only  question,  so  far  as  the 
liability  of  the  firm  to  the  third  person  is  concerned,  is 
whether  the  contract  was,  in  contemplation  of  law,  within 
the  power  of  the  partner;  if  it  was,  then  every  partner  is 
bound  by  it.^ 

§  193.  Dormant,  secret  and  nominal  partners  bound 
also. —  This  liability  involves  every  one  who  was,  at  the  time 
of  the  contract,  either  actually  or  nominally  a  partner  in 
the  firm.  The  nominal  partner  is,  of  couree,  liable,  having 
been  held  out  as  a  partner;  and  if  one  were  then  actually  a 
partner  he  is  likewise  liable  though  the  other  party  did  not 
then  know  of  it,  or  though  such  partner  has  since  retired  from 
the  firm.  A  secret  or  dormant  partner  is  therefore  liable, 
when  discovered,  upon  firm  contracts,  to  the  same  extent  as 
though  he  had  been  an  ostensil)le  partner.  The  fact  that 
the  other  party  dealt  with  the  ostensible  jiartner  or  partners, 
and  gave  credit  to  them  in  ignorance  of  the  existence  of 
the  secret  or  dormant  partner,  is  not  an  election  to  liokl  the 

'See   Sweet  v.  Wood  (189:3),   18    Ins.  Ca  v  rialone (181):.),  Ij Neb. 80:3, 
R  I.  38G,  28  Atl.  Rep.  33.>;  Farmers'    03  N.  W.  Rt'i).  802. 
9  129 


§  194:.]  LAW   OF    PARTNERSHIP. 

ostensible  partners  only,  when  the  dormant  or  secret  part- 
ners are  afterwards  discovered.  And  the  dormant  or  secret 
partners  are  bound  not  only  by  those  acts  which  were  actu- 
ally authorized,  but  also,  like  other  partners,  by  those  acts 
which  were  apparently  authorized,  or  were  within  the  scope 
of  the  business  as  actually  carried  on.^ 

Dormant  and  secret  partners  will  also  be  bound  by  the 
acts  of  the  ostensible  partners,  even  in  those  cases  where  the 
consent  of  all  partners  is  necessary,  if  the  other  party  was 
ignorant  of  their  existence  and  acted  in  ffood  faith.^ 

§  194.  Liability  ot  the  firm  upon  contracts  made  by 
one  partner  in  liis  own  name. —  As  has  been  seen,  when  a 
firm  name  has  been  adopted,  it  ought  always  to  be  used  in 
partnership  transactions;  but,  through  inadvertence  or  error, 
contracts  may  be  made  in  the  individual  name  of  one  part- 
ner which  were  designed  by  one  or  both  parties  to  be  the  con- 
tracts of  the  firm.  The  question,  therefore,  arises,  when  may 
a  contract  in  the  name  of  one  partner  be  shown  to  be  the 
contract  of  the  firm?  The  solution  of  this  question  is  af- 
fected both  by  the  nature  of  the  transaction  and  by  the 
intention  of  the  parties.     Thus: 

1.  The  contract  may  be,  (a)  a  simple  contract  not  negoti- 
able, (b)  a  negotiable  instrument,  or  (c)  a  contract  under 
seal. 

2.  The  existence  of  the  partnership  may,  at  the  time  of 
making  the  contract,  have  been  (a)  known,  or  (5)  unknown 
by  the  other  party. 

3.  The  parties,  or  one  of  them,  may  have  intended  to 

1  See  Winship  v.  United  States  Benfer  (1892),  50  Kan.  108,  31  Pac. 

Bank  (1831),  5  Peters  (U.  S.),  529;  Rep.   695,    34  Am.    St.    Rep.    110: 

Brooke    v.   Washington    (1852),    8  Bromley  v.  Elliott  (1859),  38  N.  H. 

Gratt.  (Va.)  248,  56  Am.  Dec.  142,  287,  75  Am.  Dec.  182. 
and   note;    Richardson  v.  Farmer        2 gee  Locke  v.  Lewis  (1878),  124 

(1865),  36  Mo.  35,  88  Am.  Dec.  129;  Mass.  1,  26  Am.  Rep.  631;  Reid  v. 

Gavin  v.   Walker  (1885),   14    Lea  Hollinshead  (1825),  4  B.  &   Cress. 

(Tenn.),  643;   Callender  v.  Robin-  867,  Ames'  Cas.  on  Partn.  29. 
son  (1880),  96  Pa.  St.  454;  Pitkin  v. 

130 


MlIO   BOUND    BY    ACTS    OF    PARTNER.  [§  195. 

bind  (a)  the  individual  partner,  or  (?»)  the  firm.  The  two 
latter  groups  are  subsidiary,  and  may  be  considered  under 
the  first. 

§  195.  Same  suliject  —  Known  partnership  —  Simple 
contracts  in  name  of  one  partner.— AVhere  a  person  acts 
as  partner  for  a  known  firm,  the  presumption  is  that  he  in- 
tended to  bind  the  firm  and  not  himself,  and  where  such 
was  the  intention  the  firm  and  not  the  partner  is  bound. 
This  presumption,  however,  may  be  rebutted,  and  if  it  ap- 
pears that  the  other  party  has  knowingly  dealt  with  the 
partner  as  an  individual,  and  that  the  latter  has  pledged  his 
individual  credit,  the  partner  alone  will  be  bound  and  not 
the  firm.  And  if  the  transaction  were  really  an  individual 
one,  the  firm  does  not  become  liable  because  it  afterwards 
received  the  benefit  of  the  transaction.  Thus,  if  money 
were  loaned  or  goods  sold  to  one  partner  as  an  individual, 
the  firm  does  not  become  liable  to  the  lender  or  the  seller 
simply  because  the  money  or  the  goods  came  to  the  use  of 
the  firm.  The  liability  of  the  firm  is  to  the  partner  upon 
whose  credit  the  money  or  goods  were  obtained,  and  that 
partner  must  answer  to  those  from  whom  they  were  ob- 
tained. AVhether  the  credit  was  extended  to  the  firm  as 
such,  or  to  the  partner  individually,  is  a  question  to  be  de- 
termined in  view  of  all  of  the  facts  and  circumstances  of  the 
case.^ 

Where,  however,  the  goods  or  money  are  applied  to  the 
benefit  of  the  firm,  the  firm  may  adopt  the  transaction,  and 

•See  Tyler  v.WaJdingham  (1800),  firm  is  not  liable  upon  a  note  given 

58  Conn.  375,  8  L.  R.  A.  G57:  Peter-  by  one  partner  for  his  share  of  the 

son  V.  Roach  (1877),  32  Ohio  St.  374,  capital.     First  National  Bank   v. 

30  Am.  Rep.  607;  Adams  v.  Hard-  Cringan,  s?/prrt.   So  where  one  ))art- 

ware  Co.  (1887),  78  Ga.  485;  Thorn-  ner  borrows  money  on  his  own  note 

ton  V.  LamVjeth  (188!)),  103  N.  C.  80;  to  roimburso  another  partner  for 

First   National   Bank    v.   Cringan  money  advanced  to  the  firm,  the 

(1895),  —  Va. ,  21  S.  E.  Rep.  H20;  firm  is  not  lial)le.     Redenbaugli  v. 

Brown  v.  Fresno  Raisin  Co.  (1S94),  Kelton  (1895),  —  Mo.  — ,  3a  S.  W. 

101  CaL  222.  35  Pac.  Rep.  639.    The  Rep.  67. 

181 


.§  19G,]  LAW    OF   PARTNERSHIP. 

the  benefit  received  will  be  a  sufficient  consideration  to  sup- 
port a  promise  by  the  firm  to  pay  the  debt.^ 

g  106. Note  of  one  partner. —  Similar  questions  arise 

where  a  creditor  takes  the  obligation  of  one  partner  for  a 
partnership  debt. 

If,  at  the  time  the  debt  is  contracted,  the  note  or  other 
obligation  of  one  partner  is  taken,  and  credit  given  exclu- 
sively to  him,  the  firm  will  not  be  bound ;  but  if  credit  were 
given  to  the  firm,  the  note  or  other  obligation  will  be  deemed 
to  have  been  taken  as  collateral  security  or  otherwise,  and 
the  firm  will  still  be  bound,  not  upon  the  note  but  upon  the 
original  consideration.  To  whom  the  credit  was  given  is 
here,  as  in  the  preceding  section,  a  question  of  fact  to  be 
determined  in  view  of  all  the  circumstances.^  And  even 
though  the  note  were  originally  the  obligation  of  one  part- 
ner only,  still  if  it  was  really  made  upon  the  firm  account, 
the  firm  may  adopt  the  debt  and  become  liable  to  pay  it.' 

If  the  obligation  of  one  partner,  e.  g.,  his  promissory  note, 
be  taken  for  a  previously  created  debt,  the  effect  depends 
upon  the  intention.     Such  a  note  may  be  taken  as  payment 

iSee  Seigel  v.  Chidsey  (1857),  28  note  of  the   one  partner  for  the 

Pa.  St.  279,  70  Am.  Dec.  124.  money  so  loaned  will  not  defeat 

2  See  Hoeflinger  v.  Wells  (1879),  the  action.     The  taking  of  such 

47  "Wis.  628;  North  Penn.  Coal  Co. 's  note   maybe  evidence  tending  to 

Appeal  (1863),   45  Pa.   St.    181,   84  show    that    the    money  was    not 

Am.  Dec.  487;   Maffet  v.  Leuckel  loaned  to  the  firm,  and  that  the 

(1880),  93    Pa.    St.    468;    Smith  v.  sole  credit  was  given  to  Stafford ; 

Collins  (1874),   115  Mass.   388.     In  but  it  is  not  conclusive  of  that 

Hoeflinger  v.  Wells,  supra,  where  fact;  and  if  the  jury  or  the  court 

the  question  was  whether  plaintiff  should    find    as    a   fact  that  the 

could  recover  of  the  firm  of  Staf-  money  was  borrowed  by  and  loaned 

ford  &  Wells  for  money  loaned  to  the  firm  and  upon  its  credit, 

upon  Stafford's  note,  the  court  says:  then  the  taking  of  the  individiial 

"  If  upon  the  trial  the  plaintiff  can  note  of  one  member  of  the  firm 

show  that  the    money  was    bor-  would  not  be  a  payment  of  such 

rowed  for  the  firm,  that  he  was  at  firm  debt,  unless  it  was  affirma- 

the  time  advised  that  it  was  for  tively  shown  that  such  note  was 

the  firm,  and  that  he  loaned  it  to  the  taken  in  payment  of  the  same." 
firm    and    upon    its    credit,   then        3  gee  Siegel  v.  Chidsey  (1857),  38 

the  mere  taking  of  the  individual  Pa.  St.  279,  70  Am.  Dec.  124. 

132 


"^'HO  BOUND  BY  ACTS  OF  PARTNER.        [§  197. 

of  the  firm  debt,  and  if  it  is  so  taken  the  firm  debt  is  gone ; 
but  in  order  to  discharge  the  firm  the  evidence  must  be  clear 
that  it  was  so  taken  in  satisfaction,  for  this  "will  not  be  pre- 
sumed from  the  mere  fact  of  the  taking,  and  in  the  absence 
of  such  evidence  the  firm  will  still  be  bound  upon  the  debt.^ 

§  197.  Same  subject  —  Unkuown  partnership. —  In  those 
cases  in  which  it  is  held  that  the  creditor  has  recourse  against 
one  partner  only,  it  is  because  it  is  determined  that  the  cred- 
itor has  elected  to  give  credit  to  such  partner  alone.  But 
an  election  involves  the  opportunity  of  choice  —  of  choosing 
between  the  credit  of  the  firm  and  that  of  the  individual 
partner, —  and  this  opportunity  of  choice  can  only  exist 
where  the  creditor  knew  that  there  was  a  partnership  at  the 
time  that  he  gave  credit.  If  he  did  not  then  know  of  the 
existence  of  the  partnership,  it  is  obvious  that  a  different 
question  is  presented,  but  it  is,  at  the  same  time,  a  question 
with  which  we  have  already  had  to  deal.  It  is  another  phase 
of  the  liability  of  an  undisclosed  principal  —  the  partner- 
ship —  for  the  acts  and  contracts  of  his  agent  —  the  partner. 
As  to  this,  we  have  found  that  an  undisclosed  principal 
when  discovered  is,  in  general,  bound  by  the  simple  contracts 
of  his  agent,  although  at  the  time  the  other  party  gave  credit 
to  the  agent  alone,  supposing  him  to  be  the  principal.  Two 
exceptions  to  this  rule  were  found  to  prevail:  1.  That  the 
principal  cannot  be  held  where  he  had  been  previously  led 
by  the  creditor's  conduct  to  settle  with  the  agent  upon  the 
assumption  that  the  agent  had  paid  such  creditor;  and 
2.  That  the  principal  cannot  be  held  Avhero,  after  his  dis- 
covery, the  creditor  has  elected  to  give  credit  to  the  agent 
alone.2  This  rule  applies  in  the  case  of  partnerships,  and 
subject  to  the  exceptions  named,  the  undisclosed  partners 
are  liable,  when  discovered,  upon  the  sim])le  contracts  iniidc 

iSee  LuddiriKton   v.  Bell  (1879),        2  See  Mechfiu  on  Agency,  gg  095- 
77   N.   Y.    Via,   33   Am.    Rep.    GOl;     098. 
Crooker  v.  Crooker  (1803),  52  Me. 
267,  83  Am.  Dec.  509. 

133 


§§  198-200.]  LAW   OF    PARTNERSHIP. 

really  in  behalf  of  the  firm  though  ostensibly  by  one  part- 
ner only.^  This  power  of  the  creditor  to  hold  the  undis- 
closed or  dormant  partners  liable  confers  a  right  but  does 
not  impose  a  duty ;  that  is,  the  creditor  has  usually  his  op- 
tion to  sue  all  or  only  the  one  with  whom  he  dealt  —  he  may 
sue  all,  but  is  not  obliged  to  do  so.* 

§198.  Same  subject  —  Contracts   under  seal. —  In  the 

case  of  instruments  under  seal,  different  rules  apply  for  tech- 
nical reasons.  Upon  such  an  instrument,  where  the  common- 
law  incidents  of  a  seal  still  exist,  only  those  persons  who 
are  named  as  parties  to  it  can  sue  or  be  sued ;  and  hence  if 
one  partner  gives  his  own  sealed  obligation,  or  enters  into  a 
contract  under  seal,  the  firm  cannot  be  held,  either  upon  the 
instrument  itself  or  upon  the  consideration,  by  showing  the 
contract  was  really  made  in  behalf  of  the  firm  or  that  it  re- 
ceived the  benefit  of  it.' 

§  199.  Same  subject  —  Judgment  against  one  partner. 

A  judgment  against  one  partner  for  a  partnership  debt  dis- 
charges the  other  partners  whether  ostensible  or  secret.  The 
judgment  is  a  higher  security  which  merges  the  lower;  and, 
besides,  the  liability  of  the  partners  is  a  joint  one,  upon  which 
they  cannot  be  separately  sued.* 

§  200.  Contracts  made  in  individual  names  of  all  the 
partners. —  Where  a  firm  name  has  been  adopted,  it  should 
be  used  in  partnership  transactions,  and,  as  a  rule,  the  firm 
cannot  be  bound  as  such  by  any  other  name.  But  this  rule 
is  not  inflexible,  and  between  themselves  partners  may  adopt 
such  names  as  they  please.     They  may  also  do  this  as  to 

1  See  Beckham  v.  Drake,  9  Mees.  ley,  3  Wash.  (U.  S.  C.  C.)  512;  North 
&Wels.  79;  Reynolds  v.  Cleveland  Penn.  Coal  Co.'s  Appeal  (1863),  45 
(1825),  4  Cowen  (N.  Y.),  282.  15  Am.     Pa.  St.  181,  84  Am.  Dec.  487. 

Dec.  309;  Griffith  v.  Buff  urn  (1850),  ^See    Smith    v.   Black  (1822),   9 

22  Vt.  181,  54  Am.  Dec.  64.  Serg.  &   R.  (Pa.)  142,  11   Am.  Dec. 

2  Cleveland  v.  Woodward  (1843),  686;  Wann  v.  McNulty  (1845),  7  111. 
15  Vt.  302,  40  Am.  Dec.  682.  355,   43  Am.   Dec.  58;   Suydam  v. 

3  See  Tom  v.  Goodrich,  2  Johns.  Barber  (1858),  18  N.  Y.  468,  75  Am. 
(N.  Y.)  214;  United  States  v.  Ast-  Dec.  254.   See,  also,  jjosf,  §§210,  211. 

134 


TAIIO    BOUND   BY    ACTS    OF    PARTNER.       [§§  201,  202. 

creditors  if  the  transaction  is  really  a  partnership  transaction 
and  for  its  benetit.  Thus,  though  an  obligation  signed,  not 
in  the  firm  name,  but  in  the  individual  names  of  all  of  the 
partners,  h prima  facie  an  individual  transaction  and  not  a 
partnership  one,  it  may  be  shown  to  be  a  partnership  trans- 
action not  only  between  the  partners  themselves,  but  also  in 
favor  of  the  obligee  and  against  other  creditors  of  the  firm.' 

§  201.  Contracts  where  firm  does  business  in  name  ol 
one  partner. —  It  is  not  uncommon,  as  has  been  seen,  for  a 
firm  to  do  business  in  the  name  of  a  single  partner,  and  con- 
tracts made  in  that  name  for  the  firm  will  bind  all  members.- 
If  that  partner  carries  on  no  individual  business  separate 
from  that  of  the  firm,  contracts  made  in  such  name  will  be 
presumed  to  bind  the  firm ;  if  he  does  carry  on  a  separate 
business,  no  such  presumption  arises,  and  the  person  who 
would  charge  the  firm  upon  a  contract  made  in  the  name 
of  such  partner  must  show  that  it  was  intended  to  bind  the 
firm.'^ 

§  202.  Contracts  where  there  are  two  iirms  of  same 
name  with  common  partner,— Cases  occur,  though  they 
are  comparatively  rare,  where  two  firms  are  doing  business 
under  the  same  name  in  the  same  locality,  and  having  one 
or  more  but  not  all  of  their  members  in  common.  It  Avas 
thouii-ht  at  one  time  that  where  a  contract  was  made  in  such 
firm  name  by  the  common  partner,  and  the  other  party  did 
not  know  for  which  of  the  firms  he  assumed  to  act,  either 
firm  could  l)e  held  at  the  option  of  the  other  party,  but  that 
Ixjth  could  not  he  held.    The  true  rule  seems  to  be,  however, 

>  See    Berksliire   Woolen    Co.  v.  ^  See  Rumsey  v.  Briggs  (1893),  139 

Juillard  (1879),  75  N.  Y.  535,  31  Am.  N.  Y.  323,  34  N.  E.  Rep.  929. 

Rep.  488;  Mix   v.  Shattuck  (1878),  ^See  Unit<-il  States  Bank  v.  Bin- 

50  Vt  421,  28  Am.  Rep.  511;  Free-  ney  (1828),  5  Mason  (U.  S.  C.  C),  189; 

man  v.  Campbell  (1880),  55  Cal.  197;  Yorksliiro  Banking  Co.  v.  Beatson 

Id.lings  V.  Pierson  (1884),  100  Ind.  (1880).  L.  R.  5  C.  P.  Div.  109:  Bank 

418;   Warrinor   v.  Mitchell   (1889),  of  Rocliester  v.  Monteath  (1845),! 

128  Pa.  St.  153.  Denio  (N.  Y.).  402,  43  Am.  Dec.  081. 

135 


§§  203,  204.J  LAW    OF   PARTNERSHIP. 

that  such  cases  stand  upon  no  peculiar  ground,  but  that  that 
firm  only  is  to  be  held  Avhich  by  the  facts  and  circumstances 
is  pointed  out  as  the  one  for  which  the  partner  acted.^ 

§  203.  Liability  where  the  partner  exceeds  his  author- 
ity.— A  partner,  like  other  agents,  may  incur  individual  lia- 
bility by  assuming  to  act  without  sufficient  authority.  In 
such  cases  he  may  make  express  representations  as  to  his 
authority,  and  he  may  likewise  make  an  implied  representa- 
tion by  assuming  to  act  as  a  partner.  For  a  breach  of  either 
of  these  representations  he  may  be  held  liable  to  third  per- 
sons who  are  injured  by  reason  of  his  undertaking  to  bind 
the  firm  when  he  had  no  authority  so  to  do.  Whether  he 
can  be  held  upon  the  very  contract  which  he  has  made  with- 
out authority,  depends  upon  whether  the  contract  contains 
apt  words  to  charge  him  personally.  His  liability  in  these 
cases  depends  ordinarily  upon  the  familiar  rules  which  make 
an  agent  liable  who  has  exceeded  his  authority  or  who  has 
assumed  to  act  for  a  principal  having  no  legal  existence.^ 

II.  In  Toet. 

§  204.  Firm  liahle  for  torts  of  one  partner  committed 
in  course  of  husiness.—  The  liability  of  the  firm  for  the 
torts  of  one  partner  rests  upon  the  same  foundation  as  the 

1  See  Hastings  National  Bank  v.  bank  account,  but  borrowed  from 
Hibbard  (1883),  48  Mich.  453,  13  N.  the  first  when  necessary,  and  kept 
W.  Rep.  651;  Swan  v.  Steele  (1806),  its  account  with  it.  One  of  the 
7  East,  310.  In  Hastings  National  original  partners  made  a  note  in 
Bank  v.  Hibbard,  stqyra,  it  appeared  the  firm  name  and  discounted  it  at 
that  a  firm  of  three  partners,  en-  the  plaintiff's  bank.  In  an  action 
gaged  in  operating  a  particular  by  the  bank  the  jury  found  that 
flouring  mill,  temporarily  arranged  the  bank  relied  exclusively  upon 
to  take  in  another  partner  and  run  the  credit  of  the  original  partners, 
an  additional  mill  as  another  firm.  It  was  not  claimed  that  the  money 
Both  firms,  however,  had  the  same  was  borrowed  or  used  for  the  bene- 
name  and  used  the  same  letter-  fit  of  the  later  firm.  It  was  there- 
heads,  upon  which  the  names  of  all  fore  held  that  the  additional  part- 
four  partners  were  printed,  but  the  ner  could  not  be  held  liable, 
business  of  the  two  mills  was  kept  2  See  Mechem  on  Agency,  §§  541, 
distinct.     The  second  mill  kept  no  557 ;  Taf  t  v.  Church  (1895),  163  Mass. 

136 


WHO   BOrND    BY    ACTS   OF   PARTNER.  [§  205. 

liability  of  a  principal  for  the  torts  of  his  agent,  which  has 
been  already  considered.  Thus,  the  firm  is  liable  in  a  civil 
action  for  the  negligence  of  one  partner,  committed  in  the 
transaction  of  partnership  business ;  as,  for  example,  where 
one  of  a  firm  of  lawyers  or  physicians  causes  loss  to  a  client 
or  a  patient  by  a  want  of  professional  skill  or  a  failure  to 
use  due  care  or  diligence.' 

This  liability  of  the  firm  is  not,  however,  confined  to  actions 
based  upon  a  partner's  negligence;  it  is  liable  also  for  his 
trespass,  fraud,  deceit,  misrejjresentation  or  malice,  if  com- 
mitted in  the  scope  of  the  partnership  business  and  in  fur- 
therance of  its  interests ;  as,  for  example,  where  one  partner 
in  the  prosecution  of  the  firm  business  wrongfully  seizes  the 
property  of  a  third  person,  or  institutes  malicious  prosecu- 
tions, or  is  guilty  of  a  libel.^  A  greater  liability  still  may 
also  be  incurred, by  a  previous  authorization  or  a  subsequent 
ratification. 

§  205.  Liability  of  firm  for  partner's  malicious  or  crim- 
inal act. —  But  the  firm  would  not  be  liable,  unless  previously 
authorized  or  subsequently  ratified,  for  similar  acts  commit- 
ted by  the  partner  outside  of  the  partnership  business  and 

527,  39  N.  E.  Rep.  283;  North  Star  211;    Locke    v.    Stearns    (1840),   1 

Co.  V.  Stebbins  (1893),  3  So.  Dak.  Mete.  (Mass.)  5G0,  35  Am.  Dec.  382; 

540,  54  N.  W.  Rep.  593.  Chester  v.  Dickerson  (1873),  54  N.  Y. 

iSee  Hess  v.  Lowrey  (1889),  122  1,   13    Am.   Rep.    550;    Jacobs    v. 

Ind.  225,  23  N.  E.  Rep.  156,  17  Am.  Shorey  (1868),  48  N.  H.  100,  97  Am. 

St.  Rep.  355;  Hyrne  v.  Ervvin  (18S5),  Deo.  586;  Brundage  v.  MeUon  (1895), 

23  S.  C.  226,  55  Am.  Rep.  15;  Col-  —  N.  Dak.  — ,  63  N.  W.  Rep.  209; 

Her  V.  McCall  (1887),  84  Ala.  190,  4  Haney  Mfg.  Co.  v.  Perkins  (1889), 

So.  Rep.  367;  Haley  v.  Case  (1886),  78  Mich.  1,  43  N.   W.   Rep.  1073; 

142  Mass.   316,  7  N.   E.  Rep.  877;  Lath  rop  v.  Adams  (1882),  133  Mass. 

Bucki  V.  Cone  (1889),  25  Fla.  1, 6  So.  471,  43  Am.  Rop.  528.     The  individ- 

Rep.  160.  ual  property  of  an  innocent  i)art- 

^See  Strang  V.  Bradner  (1884),  114  nor  is  not  lial)lo  to  attacliini-nt  for 

U.  S.   555,  29  L.  ed.  248;  Stanhope  a  firm  debt  fraudulently  contracted 

V.  Swafford  (1800),  80  Iowa,  45,45  by  a  copartner.   .Jalfrcy  v.  .Jennings 

N.  W.  Rep.  403;  Morehouse  v.  North-  (1891),  101  Midi.  515, 25  L.  R.  A.  045. 
rop  (1866),  33  Conn.  380, 83  Am.  Dec. 

137 


§  20G.]  LAW   OF   PARTNERSHIP. 

for  his  own  purposes,  as  where  he  acts  from  his  own  private 
malice  or  ill-will.^ 

Neither  can  one  partner,  not  personally  in  fault,  ordina- 
rily be  held  liable  in  a  criminal  or  penal  action  for  the  acts 
of  his  partner,- 

§  206.  Liability  of  firm  for  partner's  breach  of  trust.— 

Breaches  of  trust  or  misappropriation  by  one  partner  in 
respect  of  funds  or  property  which  come  into  the  possession 
of  the  firm  in  the  course  of  its  business  Avill  make  the  firm 
responsible ;  ^  but  the  firm  will  not  be  responsible,  as  for 
breach  of  trust,  because  one  partner  wrongfully  employs  in 
the  partnership  business  funds  of  which  he  alone  was  trustee, 
if  his  partners  were  ignorant  of  the  source  of  the  money  or 
of  his  want  of  title  to  it,  though  they  would  be  liable  if  they 
had  such  knowledge.* 

1  See  Rosekrans  v.  Barker  (18^5),  3  See  Todd  v.  Jackson  (1881),  75 
115  111.  331,  56  Am.  Rep.  169.  Ind.  272. 

2  See  Watson  v.Hinchman  (1879),  *  See  Englar  v.  Offutt  (1889),  70 
42  Mich.  27,  3  N.  W.  Rep.  236;  Mc-  Md.  78,  14  Am.  St.  Rep.  332;  Guillou 
Neely  v.  Haynes  (1877),  76  N.  C.  v.  Peterson  (1879),  89  Pa.  St.  163; 
122.  Gilruth  v.  Decell  (1894),  72  Miss. 

232,  16  So.  Rep.  250. 
138 


CHAPTER  XI. 

OF    THE  LIABILITY    OF  THE   FIRM  FOR   THE  ACTS  OF   ITS 
AGENTS  AND  SERVANTS. 

^  207.  Firm  liable  like  othei"  principals  for  acts  of  its  servant  and  agents. 

§  207.  Firm  liable  like  other  principals  for  the  acts  of 
its  servants  and  agents. —  It  seems  desirable  to  call  atten- 
tion—  not  for  the  purpose  of  discussion  but  that  it  may  not 
be  overlooked  —  to  the  liability  of  the  firm  for  the  acts  of 
its  ordinary  servants  and  agents.  The  discussion  of  the 
preceding  chapter  was  devoted  to  the  acts  of  the  partner  as 
agent  of  the  firm,  but  the  firm  may,  as  has  been  seen,  em- 
ploy all  the  agents  and  servants,  who  are  not  partners,  that 
the  business  may  demand.  For  the  acts  of  these  agents  and 
servants,  whether  in  contract  or  in  tort,  the  firm  is  liable  in 
the  same  cases  and  upon  the  same  conditions  as  any  other 
principal  or  master. 

The  discussion  of  this  liability  belongs,  therefore,  to  treat- 
ises upon  the  law  of  agency  and  master  and  servant ;  with 
the  former  of  which,  at  least,  it  is  assumed  that  the  student 

is  already  familiar. 

139 


CHAPTER  XII. 

OF  THE  NATURE   AND   EXTENT  OF  THE  LIABILITY   OF 
PARTNERS. 


§  208.  In  general. 

I.  Op  the  Nature  of  Partner- 
ship Obligations. 

209.  Partnership  obligations    in 

contract  are  joint. 

210,  211.  Judgment  against 

one  releases  all. 

212.  Release  of  one  releases 

all. 

213.  Partnership   obligations    in 

tort  are  joint  and  sevex'al. 

I.  Of  the  Extent  of  Partner- 
ship Liability. 

214.  Each     partner     liable     for 

whole  of  partnership  obli- 
gations. 


§  215.  Individual  property  of  one 
partner  may  be  taken  to 
satisfy  partnership  debts. 

216.  Partner  whose  property  is 

so  taken  may  have  contri- 
bution. 

217.  Exemptions  from  execution. 

IIL  Of  the  Beginning  and  End- 
ing OF  Liability. 

218.  In  general. 

219.  Of  an  incoming  partner.    ' 

220.  Of  an  outgoing  partner. 


§  208.  Ill  general.—  The  question  of  the  liability  of  part- 
ners involves  both  the  nature  of  that  liability  and  its  extent. 
These  subjects,  therefore,  will  be  separately  considered. 


I.  Of  the  JSTatuke  or  Paktneeship  Obligations. 

§  209.  Partiiersliip  obligations  when  arising  on  con- 
tract are  joint.— The  obligation  of  those  contracts  which 
are  binding  upon  the  firm  is  the  joint  obligation  of  all  the 
partners  and  not  the  several  obligation  of  any  of  them. 
One  partner  may,  as  has  been  seen,  bind  himself  only;  but 
if  he  binds  the  firm,  he  binds  all  members  of  it  jointly  and 
not  severally. 

It  is  sometimes  said  that,  while  partnership  contracts  are 

140 


NATURE   AND    EXTENT    OF    LIABILITY.  [§  210. 

thus  joint  at  law,  they  are  joint  and  several  in  equity;  but 
this  seems  to  be  true  as  respects  the  remedy  only.^ 

§210.  Same  subject  — Judgment  against  one  partner 
releases  others.—  The  obligation  of  firm  contracts  being 
joint,  if  the  creditor  proceeds  to  judgment'  against  one  of 
them  alone  he  releases  the  others.^  In  a  leading  case  ^  in 
the  supreme  court  of  the  United  States,  where  a  creditor 
who  had  taken  judgment  against  one  partner  upon  a  firm 
note  in  one  state  sought  to  recover  against  another  partner 
in  another  state,  the  court,  through  Mr.  Justice  Field,  said : 
"It  is  true  that  each  copartner  is  bound  for  the  entire 
amount  due  on  copartnership  contracts ;  and  that  this  obli- 
gation is  so  far  several  that  if  he  is  sued  alone,  and  does  not 
plead  the  non-joinder  of  his  copartners,  a  recovery  may  be 
had  against  him  for  the  whole  amount  due  upon  the  con- 
tract, and  a  joint  judgment  against  the  copartners  may  be 
enforced  against  the  property  of  each.  But  this  is  a  differ- 
ent thing  from  the  liability  which  arises  from  a  joint  and 
several  contract.  There  the  contract  contains  distinct  en- 
gagements—that of  each  contractor  individually,  and  that 
of  all  jointly,— and  different  remedies  may  be  pursued  upon 
each.  The  contractors  may  be  sued  separately  on  their 
several  engagements  or  together  on  their  joint  undertaking. 
But  in  copartnerships  there  is  no  such  several  liability  of 
the  copartners.  The  copartnerships  are  formed  for  joint 
purposes.  The  members  undertake  joint  enterprises,  they 
assume  joint  risks,  and  they  incur  in  all  cases  joint  liabil- 
ities. In  all  copartnership  transactions  this  common  risk 
and  liability  exist.  Therefore  it  is  that  in  suits  u^ion  these 
transactions  all  the  copartners  must  be  brought  in,  except 
where  there  is  some  ground  of  personal  release  from  liabil- 
ity, as  infancy,  or  a  discharge  in  bankruptcy;  and  if  not 
l>rought  in,  the  omission  may  be  pleaded  in  abatement.    Tbo 

•  See  post,  §  270.     And  see   the        ^  See  Kendall  v.  Hamilton  (1879), 
opinions  in   Kendall  v.  Hamilton     L.  R  4  App.  Cas.  504. 
(1870;,  4  App.  Cas.  004.  3  Mason  v.  Eldred  (18G7).  0  Wall. 

(U.  S.)  aai,  Paige's  Partn.  Cas.  151. 
141 


§§  211,  212.]  LAW    OF    PARTNERSHIP. 

plea  in  abatement  avers  that  the  alleged  promises,  npon 
which  the  action  is  brought,  were  made  jointh^  with  another 
and  not  with  the  defendant  alone  —  a  plea  which  would  be 
without  meaning  if  the  copartnership  contract  was  the  sev- 
eral contract  of  each  copartner." 

§  211,  Same  subject. —  "  The  general  doctrine  maintained 
in  England  and  the  United  States,"  continued  the  same 
learned  judge,  "  may  be  briefly  stated.  A  judgment  against 
one,  uj  Gil  a  joint  contract  of  several  persons,  bars  an  action 
against  the  others,  though  the  latter  were  dormant  partners 
of  the  defendant  in  the  original  action  and  the  fact  was  un- 
known to  the  plaintiff  when  that  action  was  commenced. 
"When  the  contract  is  joint,  and  not  joint  and  several,  the 
entire  cause  of  action  is  merged  in  the  judgment.  The  joint 
liability  of  the  parties  not  sued  with  those  against  whom 
the  judgment  is  recovered  being  extinguished,  their  entire 
liability  is  gone.  They  cannot  be  sued  separately,  for  they 
have  incurred  no  several  obligation;  they  cannot  be  sued 
jointly  with  the  others,  because  judgment  has  been  already 
recovered  against  the  latter,  who  would  otherwise  be  sub- 
jected to  two  suits  for  the  same  cause." 

This  rule,  however,  may  be  changed  by  statute  where 
part  of  the  defendants  in  the  first  action  who  are  sought  to 
be  held  liable  in  the  second  were  not  personally  served  with 
process.^ 

§  212.  Same  subject  —  Release  of  oue  releases  all. —  An- 
other consequence  of  the  joint  character  of  partnership  ob- 
ligations is  the  rule  that  a  release  of  one  of  the  partners 
releases  all.^  This  rule  applies,  however,  only  to  the  case  of 
a  technical  release  under  seal,  and  does  not  extend  to  a  mere 
covenant  not  to  sue  one  partner,  or  to  any  other  instrument 

1  Mason  v.  Eldred,  stipra.  for  his  liability  "  upon  the  obliga- 

2 1  Lindley  on  Partnership  (Ew-    tion,  imports  a  technical  release, 

ell's  ed.),  237.  Thus  a  receipt  under    and  therefore  releases  all.     Hale  v. 

seal,  given  to  one  of  two  or  more    Spaulding  (1888),  145  Mass,  482,  14 

joint  debtors,  "  in  full  satisfaction    N.  E.  Rep.  534,  1  Am.  St.  Rep.  475. 

142 


NATCKE   A^•D   EXTENT   OF   LIABILITY.       [§§  213,'214. 

reserving  the  creditor's  rights  against  the  other  partners, 
which,  though  in  the  form  of  a  release,  may  be  treated  as  a 
covenant  not  to  sue  rather  than  as  an  absohite  release.^ 

§  213.  Partiiershii)  obligations  arising  from  tort  are 
joiut  and  several. —  The  liability,  however,  of  partners  for 
torts  committed  by  one  partner  or  by  the  servant  of  the 
firm  is  joint  and  several,  and  the  action  may  be  brought 
against  one  or  all  or  an  intermediate  number.- 

"  To  this  general  rule,"  says  Mr.  Justice  Lindley,^  "  an  ex- 
ception occurs  where  an  action  exjdelido  is  brought  against 
vj       several  persons  in  respect  of  their  ownership  in  land,  for 
^  '    then  they  are  liable  jointly,  and  not  jointly  and  severally." 


^ 


r:i 


s; 


II.  Or  THE  Extent  oe  Partnership  Liability. 

§  214.  Each  partner  liable  in  solido  for  partnership  ob- 
ligations.—Although  the  obligation  of.  partnership  liabili- 
ties may  be  in  nature  joint,  it  does  not  follow  that  the 
liability  when  established  is  to  be  jointly  or  ratably  enforced 
against  the  partners.  The  liability  may  be  Joifit,  but  it  is 
also  e?itire.  Each  partner,  therefore,  is  personally  and  indi- 
vidually liable  for  the  entire  amount  of  all  such  obligations, 
whether  arising  from  contract  or  tort,  as  are  binding  upon 
the  firm.  His  liability,  in  ordinary  partnershii)s,  is  not  lim- 
ited by  the  amount  of  his  contribution  to  the  partnership 
capital,  but  extends  to  his  entire  property ;  and  it  makes  no 
difference  what  may  be  his  share  or  interest  in  the  partner- 
ship business,  or  whether  he  is  an  active  or  a  secret  partner, 
or  whether  the  other  partners  are  responsible  or  not ;  he  is 
liable  in  solido  for  the  partnership  obligations. 

iLindley,    uU    supra;    Hale    v.  Ricli.  (S.  C.)  L.  595;  Howe  v.  Shaw 

Spaulding,     supra;    Benjamin    v.  (18G8),  50  Me.  291;  Roberts  v.  Jolin- 

McConnell  (1847),  4  Gilni.  (111.)  530,  son  (1874),  58  N.  Y.  018. 
40   Am.  Dec.  474;    Berry   v.  Gillis        nLindleyon   Partnership  (Ew- 

(1845),  17  N.  H.  9,  43  Am.  Dec.  584.  ell's  ed.),  198",  citing  1  Wins.  Suunds. 

2  See  White  v.  Smith   (1800),  12  291,/ and  y. 

143 


§§  2l5,  216.]  LAW   OF   PAKTNEESHIP. 

§  215.  Individual  property  of  partner  may  l)e  taken  to 
satisfy  partnership  debt. —  Moreover,  if  judgment  be  ob- 
tained against  the  firm  upon  an  obligation  existing  against 
it,  the  execution,  though  in  form  against  all,  may,  unless  other- 
wise provided  by  statute,  be  levied  directly  upon  the  indi- 
vidual property  of  any  one  or  more  of  the  partners  without 
regarding  or  exhausting  the  firm  property.  The  creditor,  -^ 
further,  is  under  no  obligation  to  levy  against  all  the  part- 
ners ratably,  but  may  select  any  one  or  more  and  levy  exe- 
cution against  him  or  them  until  the  judgment  is  satisfied, 
leaving  all  questions  of  contribution  to  be  settled  afterwards 
between  the  partners  themselves.^  In  case  any  partner  is  ^ 
not  served  with  process,  no  personal  judgment  can  ordinarily 
be  reftdered  against  him,  nor  can  his  individual  property 
usually  be  taken,  though  the  firm  property  may  be  seized. 

If  conflict  arises  between  the  firm  creditors  and  the  indi- 
vidual creditors  of  the  partner,  as  to  the  application  of  the 
individual  property  of  a  partner,  special  rules  apply  which 
will  be  hereafter  considered.^ 

§  216.  Partner  paying  debt  may  have  contribution.— 

"Where  one  partner  is  thus  compelled  to  pay  or  satisfy 
the  whole  of  a  partnership  debt,  he  has  a  remedy,  usually 
upon  an  accounting  in  equity,'  to  require  the  other  part- 
ners to  contribute  their  pro  rata  shares.  For  though  each 
partner  as  to  third  persons  is  liable  for  all  the  partnership 
debts,  yet  as  between  themselves  each  partner  is  liable  only 
for  his  own  share.  And  even  as  to  third  persons,  though 
each  is  liable  for  all  the  debts  of  the  firm,  yet  his  liability 
is  said  to  be  as  a  principal  debtor  for  his  own  share,  and  as 
surety  for  the  other  partners  for  the  remainder. 

1  See  Randolph  v,  Daly  (1863),  16  partner  is  not  liable  to  attachment 

N.  J.  Eq.  313;  Clayton  v.  May  (1881),  for  a  firm  debt  fraudulently  con- 

68  Ga,  27;  Stout  v.  Baker  (1884),  32  tracted  by  another  member  of  the 

Kan.  113.    But  in  Jaffray  v.  Jen-  firm.                                                             9 

nings  (1894),  101  Mich.  515,  25  L.  2  See  post,  ch.  XIX. 

R.  A.  645,  it  is  held  that  the  indi-  » See  ante,  §  127. 
vidual  property  of    an    innocent 

144 


NATURE    AND    EXTENT   OF    LIAlilLITT.       [§,$  217,  218. 

§  217.  Exemptions  from  execution  on  partnersliip  prop- 
<ii't3'. —  The  present  seems  an  appropriate  place  to  mention 
tbe  question  of  the  right  of  the  firm  or  of  one  partner  to 
claim  the  statutory  exemjitions  from  execution  against  the 
partnership  ])roperty.  The  authorities  are  very  much  in 
conflict,  but  the  clear  weight  of  authority  is  to  the  effect 
that,  during  the  continuance  of  the  partnershij>,  neither  the 
lirm  nor  one  partner  can  claim  such  exemptions.^  In  Michi- 
gan, Georgia,  North  Carolina  and  New  York,  the  rule  is 
otherwise.^ 

HI.  Of  the  Beginning  and  Ending  of  Liability. 

§  218.  In  general.—  The  liability  of  the  partner  is  based 
upon  the  theory  that  he  was  a  principal  in  the  business  in 
which  the  obligation  was  incurred.  It  often  becomes  ma- 
terial, therefore,  to  determine  Avhen  he  became  or  ceased  to 
be  a  partner,  and  whether  he  was  such  at  the  time  the  dis- 
puted liability  arose.  He  may  contend  that  the  obligation 
was  incurred  before  he  became  a  partner;  or  that  it  arose 
after  he  had  ceased  to  be  such.  Where  the  question  is 
whether  any  partnership  at  all  had  then  been  organized,  the 
question  will  be  governed  by  principles  already  referred  to. 
If  the  question  is  whether  all  partnerhip  relations  have 
ceased,  considerations  hereafter  to  be  mentioned  will  con- 
trol. But  a  person  may  be  admitted  as  a  partner  to  a  firm 
already  existing,  or  he  may  retire  from  a  firm  which  there- 
after continues  business,  and  his  liability  in  either  case  re- 
quires some  special  consideration. 

'  See  Cowan  v.  Creditors  (1888),        ■*  See  McCoy  v.  Brennan  (1886), 

'71  CaL  403, 11  Am.  St.  Rep.  294,  and  61  Mich.  302,   1  Am.  St.  Rep.  589: 

cases   cited;    Thurlow   v.   Warden  Blancliard  v.  Pascal  (1881),  08  CJa, 

(1889),  «2  Ma  104,  17  Am.  St  Rop.  y2,    45   Am.    Rep.   474;    Evans    v. 

472;    Aiken   v.   Steiner   (1892)),   98  Bryan  (1880),  95  N.   C.    174,  59  Am. 

Ala.  355,  39  Am.  St.  R('i).  58;  Pond  Rep,  233;  Stewart  v.  Brown  (1807), 

V.  Kimball   (1809),    101   Mass.    105;  37  N.  Y.  350,  93  Am.  Dec.  578, 
Prosser  v.  Hartley  (1880),  35  Minn. 
340,  29  N.  W.  Rep.  150. 

10  143 


§§  219,  220.]  LAW    OF    PARTNERSHIP. 

§  219.  Of  an  iiicomiiii?  partner. —  A  person  who  enters  a 
previously  existing  firm  is  often  called  an  incoming  partner. 
The  admission  of  a  new  partner  really  constitutes  in  law  a 
dissolution  of  the  old  and  the  creation  of  a  new  partnership, 
though  in  actual  practice  it  is  often  not  so  regarded,  the 
firm  by  consent  being  treated  as  continuing,  notwithstand- 
ing the  change  in  membership. 

An  incoming  partner  is  not  liable  for  the  previously  con- 
tracted obligations  of  the  firm  to  which  he  is  thus  admitted, 
unless  by  special  agreement  he  has  assumed  such  a  liability, 
or  has  so  conducted  himself  as  to  raise  a  presumption  of  such 
an  agreement.  He  acquires  also  no  greater  interest  in  the 
property  of  the  former  partnership  than  the  agreement  which 
provides  for  his  admission  may  confer  upon  him.^ 

§  220.  Of  an  outgoing  partner. —  A  person  who  retires 
from  a  firm  which  thereafter  continues  is  said  to  be  an 
outgoing  partner.  His  withdrawal  is,  of  course,  in  law  a  dis- 
solution of  the  firm,  —  though  in  practice  the  firm  is  fre- 
quently spoken  of  as  continuing,  —  and  his  further  liability 
is  governed  by  the  general  rules  governing  dissolution.  He 
is  therefore,  as  will  be  seen,^  in  general  liable  for  acts  done 
until  he  has  not  only  withdrawn  from  the  firm  but  has  also 
given  due  notice  of  his  withdrawal.' 

iSee  Hatchett  V.  Blanton  (1883),  (1879),  64  Ga.  243;  Love  v.  Payne 
72  Ala.  423;  Ringo  v.  Wing  (1887),  (1880),  73  Ind.  80,  88  Am.  Rep.  111. 
49    Ark.   457;    Bracken    v.   Dillon        ^  See  post,  ^  2G6. 

3  See  pos^§§  258-265. 
146 


CHAPTER  XIII. 


OF  ACTIONS  BY  AND  AGAINST  THE  FIRM. 


^  221.  In  general. 

L  Actions  by  the  Firm. 
322.  What  questions  involved. 

1.  In  Contract. 
223.  a.  Contracts  made  in  firm 

name. 
224  6.  Contracts  made  in  name 
of  one  partner  for  the 
firm. 

225.  Actions  cannot  usually  be 

brought  in  firm  name. 

2.  In  Tort. 

226.  All  partners  sue  for  tort  af- 

fecting firm. 


II.  Actions  against  the  Firm. 
§  227.  What  questions  involved. 
1.  In  Contract. 

228.  All  actual    and    ostensible 

partners  should  be  joined. 

229.  Dormant   and   secret   part- 

ners proper  but  not  neces- 
sary parties. 

2,  Action  of  Tort. 

230.  Actions    of    tort    may    be 

brought  against  all  or  any 
of  the  partnera 


§  221.  In  general.— The  question  of  actions  by  the  firm 
involves  somewhat  different  considerations  from  those  raised 
when  the  action  is  against  the  firm.  Each  subject  will  there- 
fore be  separately  considered.  What  is  here  said  has  refer- 
ence to  actions  brought  during  the  continuance  of  the  firm. 
The  rules  applicable  Avhere  the  partnership  is  dissolved  by 
death  or  otherwise  will  be  considered  later  when  dealing 
with  the  effect  of  dissolution.^ 

I.  Actions  by  the  Firm. 

§222.  Who  shonld  sue  in  actions  by  the  firm The 

question  who  should  join  as  parties  plaintifi"  may  arise  when 
the  action  is  (1)  in  contract,  or  (2)  in  tort.     In  the  former 


1  See  post,  §  268  et  seq. 
147 


§§  223,  224.]  LAW    OF    PARTNERSHIP. 

case  the  contract  may  have  been  made  {a)  in  the  name  of  the 
firm,  or  (h)  in  the  name  of  one  partner  for  the  benefit  of  the 
firm. 

1.  In  Contract. 

§  223.  a.  Contracts  made  in  firm  name. —  In  actions  upon 
contracts  made  in  the  name  of  the  firm,  the  action  should  be 
brought  in  the  individual  names  of  all  the  persons  who  were 
the  actual  and  ostensible  partners  at  the  time  the  debt  or 
contract  sued  upon  was  made  or  incurred.  If  some  of  those 
partners  have  since  retired  from  the  firm,  the  action  must 
still  be  in  the  names  of  those  who  were  the  partners  at  the 
time,  and  cannot  be  maintained  in  the  names  of  the  present 
partners,  except  in  those  cases  in  which  the  outgoing  part- 
ners have  assigned  their  interests  to  the  incoming  partners, 
and  the  statutes  permit  such  assignees  to  sue  in  their  own 
names,  or  in  which  there  has  been  a  promise  to  pay  to  the 
new  firm. 

If  one  has  been  admitted  as  a  partner  who  was  not  such 
at  the  time  the  contract  was  made,  he  cannot  join  in  the  ac- 
tion, although  it  were  agreed  as  between  the  partners  them- 
selves that  he  should  become  equally  interested  with  the 
others  in  all  the  existing  property  and  rights  of  the  firm; 
unless,  after  the  accession  of  the  incoming  partner,  there  has 
been  a  new  and  binding  promise  to  pay  the  firm  as  newly 
constituted.  Dormant  partners  are  admissible  but  not  indis- 
pensable parties.  IS'ominal  partners  need  not  be  joined  un- 
less they  have  been  expressly  named  in  the  contract.' 

§  224.  h.  Contracts  made  in  name  of  one  partner  for 

the  firm. —  Where  the  contract  was  made  in  the  name  of 
one  partner  but  for  the  benefit  of  the  firm,  the  action  should 
usually  be  brought,  on  simple  contracts,  in  the  name  of  all 
the  partners  who  constituted  the  firm  at  the  time  the  con- 

1  See  Fireman's  Ins.  Co.  v.  Floss  v.  Loop  (1S33),  5  Vt.  116,  26  Am. 
(1887),  67  Md.  403,  10  Atl.  Rep.  189,  Dec.  286;  Monroe  v.  Ezzel  (1847),  11 
1  Am.  St.  Rep.  398;  Wood  v.  O'Kelly  Ala.  603;  Seymour  v.  Railroad  Co. 
(1851),  8  Cush.  (Mass.)  406;  Hilliker    (1882),  106  U.  S.  320. 

148 


ACTIONS   BY    AXT)    AGAINST   FIRM.         [§§  225,  226. 

tract  was  made,  though,  where  the  contract  is  expressly  made 
with  one  partner,  he  alone  mio-ht  sue  upon  it;  on  contracts 
under  seal  the  action  must  be  brought  in  the  name  of  the 
partner  who  made  it.^ 

Where  the  firm  sues  on  a  contract  made  by  one  partner 
who  did  not  disclose  the  existence  of  the  firm,  the  defendant 
may  usually  avail  himself  of  any  defenses  which  might  have 
been  open  to  him  if  the  partner  had  sued  in  his  own  name." 

§  225.  Actions  cannot  usually  be  brougiit  in  firm  name.  — 

As  has  already  been  noticed,  actions  cannot  be  brought  by  the 
firm  in  the  firm  name  unless  by  virtue  of  a  statute  author- 
izing it.  In  the  absence  of  such  a  statute,  partners  sue  col- 
lectively, but  as  individuals.  In  their  process  and  pleading  it 
is  proper,  though  not  usually  necessary,  to  allege  that  they 
are  partners  and  constitute  the  firm  named. 

In  many  states,  however,  there  are  now  statutes  author- 
izing suits  in  the  firm  name,  either  generall}'^  or  where  the 
individual  names  are  not  known  at  the  time  the  action  is 
commenced. 

2.  In  Tort. 

%  226.  All  partners  must  sue  for  torts  affecting  firm. — 

In  actions  for  torts  committed  against  the  fii-m  as  such,  such 
as  trespass  to  its  property,  injury  to  its  business,  libels  upon 
it,  and  the  like,  all  of  the  partners  must  join  as  plaintiffs. 
One  partner,  therefore,  cannot  maintain  an  action  to  I'ccover 
damages  for  an  injury  to  firm  property.*  There  can  be  no 
recovery,  however,  in  the  action  by  the  firm,  for  injuries 
which  affect  the  partners  personally.  Thus,  for  example, 
when  suing  for  a  libel  upon  the  firm,  the  injury  to  tlie  firm 
business  is  only  to  be  recovered  for  in  the  firm's  action,  and 
not  the  injury  to  the  feelings  of  the  partners  personally; 

i.See  Metcalfe  v.  Rycroft  (1817),        ^See  Sindeliire  v.  Walker  (18!)  1). 

6  Maule  &  Sel.  75:  Scott  v.  Good-  137  111.  43,  27  N.  E.  Hep.  01).  31  Am. 

win  (1797),  1  Bos.  &  Pul.  07;  State  St.  Rop.  3r)3.     See,  also.  White  v. 

V.  Morritt  (1879),  70  Mo.  275.  Campbell  (1893),  18  R.  I.  150;  Hijre- 

■^See     (Hlhert     v.     Liclitenberg  low  v.  Rcyiiol(lH(1888),(58  Mich.  31 1. 

(1894),  98  Mich.  417.  30  N.  W.  Rep.  95. 

149 


§§  227-229.]  LAW  OF  partnership. 

and  when  suing  for  the  wrongful  seizure  of  property,  the 
seizure  of  the  individual  property  of  one  partner  is  not  to 
be  considered.^ 

II.  Actions  against  the  Firm. 

§  227.  Who  should  be  sued  in  actions  against  the  firm. 

The  question,  who  are  proper  parties  defendant  in  actions 
against  the  firm,  presents  substantially  the  same  considera- 
tions as  the  question  who  should  be  plaintiffs. 

1.  In  Contract. 
%  228.  All   actual  and  ostensible  partners  should  be 

joined. —  The  contract  obligations  of  the  firm  being  joint, 
all  of  the  actual  and  ostensible  partners  who  were  such  at 
the  date  of  the  contract  must,  as  a  rule,  be  joined  as  parties 
defendant  in  actions  of  contract.  This  rule,  however,  has 
been  changed  in  several  states  by  statutes  which  make  joint 
debts  joint  and  several  at  the  option  of  the  obligee.^ 

The  fact  that  one  who  was  a  partner  when  the  contract 
was  made  has  since  retired  will  not  relieve  him  from  liability ; 
neither  can  one  who  was  not  then  a  partner,  but  has  since 
come  in,  be  held  liable  unless  by  novation  or  otherwise  he 
has  assumed  liability.* 

§  229.  Dormant  and  secret  partners  proper  but  not  nec- 
essary parties. —  Dormant  and  secret  partners  are  proper 
but  not  necessary  parties.  If  the  contract  were  made  by 
one  partner  in  his  own  name,  but  really  for  the  firm,  that 
partner  or  all  of  the  partners  may  be  sued,  if  it  were  a  sim- 
ple contract ;  but  if  it  were  a  specialty,  the  partner  named 
in  it  can  alone  be  sued.* 

1  Watts  V.  Rice  (1883),  75  Ala.  289;  sey,  New  Mexico,  North  Carolina 
Donaghue  v.  Gaffy  (1885),  53  Conn,     and  Tennessee. 

43,  2  Atl.  Rep.  397.  »See  ante,  §§  218-220. 

2  This  seems  to  be  the  case  in  Ala-  *  See  Cleveland  v.  Woodward 
bama,  Arkansas,  Colorado,  Georgia,  (1843),  15  Vt.  302,  40  Am.  Dec.  682; 
Iowa,  Kansas,  Kentucky,  Missis-  North  v.  Bloss  (1864),  30  N.  Y.  374; 
sippi,  Missouri,  Montana,  New  Jer-  Page   v.   Brant   (1856),    18    111.   37; 

Hatch  V.  Wood  (1862),  43  N.  H.  683. 
150 


ACTIONS   BY    AND    AGAINST    FIRM.  [§  230. 

2.  Actions  of  Tort. 

§  230,  Actions  of  tort  may  be  brought  against  all  or  any 
of  the  partners. —  Causes  of  action  in  tort  for  wrongs  com- 
mitted either  by  the  firm,  or  by  a  j3artner  in  its  behalf,  or 
by  its  servants  or  agents,  are  not  joint,  but  jomt  and  several, 
and  the  suit  may  be  brought  against  all  or  any  of  the  part- 
ners. 

An  exception  to  this  rule  is  said  to  exist  where  the  action 
arises  in  respect  of  their  common  interest  in  land,  where  all 
ought  to  be  joined. 

151 


CHAPTER  XIV. 


OF  THE  TERMIN  A.TION  OF  THE  PARTNERSHIP. 


§  331.  Of  the  methods  of  termina- 
tion in  general. 

I.  Termination  by  Act  of  Par- 
ties. 

1,  Termination  by  Original  Agree- 

ment. 

233.  What  methods  included. 

233.  Termination   by  lapse 

of  time. 

334.  Termination  by  accom- 
plishment of  object. 

2.  Dissolution  by  Subsequent  Act  of 

Parties. 

235.  In  general. 

236.  Dissolution  by  act  of  all  — 

Mutual  consent. 

237.  Dissolution  by  act  of  one  — 

Partnership  at  will. 

238.  Partnership  on  condi- 
tion, 

239.  Dissolution  by  one  partner 

when  created  for  definite 
period. 
240-243.  Can  there  be  an  in- 
dissoluble partnership?         1 

§  231.  Of  the  methods  of  termination  in  general.— 

The  methods  by  which  the  partnership  relation  may  be  ter- 
minated may  be  classified,  like  those  for  terminating  the  re- 
lation of  principal  and  agent,  under  two  heads :  I.  By  the  act 
of  the  parties.  II.  By  operation  of  law.  The  first  of  these 
may  be  further  subdivided  as  follows:  1.  By  virtue  of  the 
original  agreement  of  the  parties.  2.  By  force  of  their  sub- 
sequent act 

152 


§  243.  Method  of  dissolving  by  act 
of  one  partner, 

II.  Termination  by  Act  or  Oper- 
ation OF  Law. 

244.  What  methods  included. 
1.  Events  Causing  Termination. 

245.  Death  of  a  partner. 

246.  Insanity  of  a  partner. 

247.  Banla-uptcy  of  a  partner. 

248.  Marriage  of  a  partner. 

249.  Guardianship  of  a  partner. 

250.  War  between   countries  of 
partners. 

2.  Termination  by  Decree  of  Court. 

251.  Declaring  void. 

252.  Dissolving  in  equity. 

253.  Causes    for     dissolution  — 
Fraud. 

254.  Insanity  or  incapacity 

of  partner. 

255.  356.  Misconduct    of   a 

partner. 

357.  Impossibility    of    suc- 
cess. 


TERMINATION    OF   PARTNERSHIP.        [§§  232-236. 

I.  Termination  by  Act  or  the  Parties. 

1.  Terinination  hy  Original  Agreement. 

§  232.  What  methods  iueluded. —  The  partnership  may 
be  said  to  be  terminated  by  orioinal  agreement  where  it 
comes  to  an  end  by  virtue  of  some  limitation  expressly  or 
impliedly  put  upon  it  by  the  parties  at  the  time  of  its  crea- 
tion. There  are  two  principal  methods  falling  under  this 
head:  a.  By  lapse  of  time ;  5.  By  accomplishment  of  object, 

§  233.  Termination  by  lapse  of  time.—  a.  Partner- 
ship is  terminated  by  lapse  of  time  where  the  period  for  its 
continuance  was  originally  fixed  by  the  agreement  of  the 
partners,  and  that  period  has  elapsed.  It  may  be  continued 
afterwards  by  agreement,  but  this  is  practically  the  creation 
of  a  new  partnership.^ 

§  234. Termination  by  accomplishment  of  object. — 

h.  Partnership  comes  to  an  end  by  accomplishment  of  its 
object  where  it  was  originally  created  for  a  single  or  tem- 
porary purpose,  or  a  single  transaction,  and  that  purpose 
has  been  accomplished  or  that  transaction  has  come  to  an 
end.  Such  a  partnership  may  be  continued  by  agreement 
or  acquiescence,  but  otherwise  it  comes  to  an  end.'^ 

2.  Dissolution  Inj  Suhseqitent  Act  of  Parties. 

%  235.  In  general. —  The  dissolution  of  the  partnership 
by  the  subsequent  act  of  the  parties  may  be  the  result  of  the 
act  of  all  of  the  partners  or  of  one.  That  act  may  bo  taken 
with  the  mutual  consent  of  all,  or  it  may  be  sought  to  be 
taken  by  one  against  the  wish  of  the  others, 

§  230.  Dissolution  by  act  of  all  — Mutual  consent.— 

Dissolution  by  the  act  of  all  of  the  partners  finds  its  most 
common  form  in  dissolution  by  mutual  consent.     The  same 

1  See  Phillips  V.  KcedcT  (1800),  18  Drake  (IHH.l),  ;{:{  Minn,  los,  :>:i  N. 
N,  J.  Eq.  05,  W.  Rep.  H4(»;  Hank  t)f  Montreal  v, 

2  See   Sims    v.   Smith  (1858),   11  Pa^e  (1881),  08  HI.  KW. 
Rich.    (S.    C.)  L.   503;    Bohrer    v. 

1.>J 


§§  237,  238.]  LAW  OF  partnership. 

persons  who  created  the  partnership  may  terminate  it,  and 
they  may  do  this  as  well  where  it  was  originally  created  to 
endure  for  a  fixed  period,  not  yet  ex])i  jJ,  as  where  no  pe- 
riod was  fixed.  The  same  result  will  practically  ensue 
where  all  refuse  to  carry  on  the  business  or  unite  in  wind- 
ing it  up  and  dividing  the  assets.^ 

§  237.  Dissolution  by  act  of  one  partner  — Partnerships 
at  will. —  The  question  of  the  power  and  right  of  one  part- 
ner, or  any  number  less  than  all,  to  dissolve  the  partnership 
depends  largely  upon  the  period  for  which  it  was  created. 
If  no  time  was  fixed  for  its  continuance,  it  is  in  law  a  part- 
nership at  will,  and  may  be  terminated  by  any  partner  with- 
out liability  at  any  time.- 

The  civil,  French  and  Scotch  law  declare  that  the  right 
to  dissolve  even  a  partnership  at  will  is  subject  to  the  con- 
ditions that  it  shall  be  exercised  in  good  faith  and  at  a  rea- 
sonable time;^  but  these  limitations  do  not  appear  to  be 
recognized  by  the  English  common  law. 


4 


§  238.  Dissolution  by  act  of  one  partner—  Partnership 
on  condition.— The  partners  may  provide  in  their  partner- 
ship agreement  or  articles  that  one  partner  shall  have  the 
right  to  terminate  the  partnership,  though  formed  for  a  defi- 
nite period,  by  giving  a  stipulated  notice  or  upon  the  hap- 
pening of  a  specified  event.  Where  such  a  provision  is 
made,  the  partner,  by  acting  in  pursuance  of  it,  may  law- 
fully terminate  the  partnership  even  though  the  period  for 
which  it  otherwise  would  continue  has  not  expired.* 

iSee  Bank  v.  Page  (1881),  98  111.  67,  13  N.  E.  Rep.  67;  Fletcher  v. 

109;  Wells  v.  Ellis  (1885),  68  Cal.  Reed  (1881),  131  Mass.  313,  Paige's 

343,  9  Pac.  Rep.  80;  Ligare  v.  Pea-  Partn.  Cas.  193;  Howell  v.  Harvey 

cock  (1884),  109  111.  94;  Richardson  (1843),  5  Ark.  370,  39  Am.  Dec.  376. 

V.  Gregory  (1888),  136  111.  166,  18  N.  ^See  Howell  v.  Harvey,  supra. 

E.  Rep.  777.  *  See  Story  on  Partnership,  §  375, 

2  See  Walker  v.  Whipple  (1885),  5  See  Swift    v.   Ward  (1890),   80 

58  Mich.  476,  35  N.  W.  Rep.  473;  Iowa,  700,  45  N.  W.  Rep,  1044, 11  L. 

Blake  v.  Sweeting  (1887),  131  111.  R.  A.  303. 

154 


TERMINATION   OF   PARTNERSHIP.         [§§  239,  2i0. 

§  239.  Dissolution  by  one  partner  when  for  definite 
period. —  If,  however,  the  partnership  was  originally  created 
to  continue  for  a  fixed  period,  and  no  provision  is  made  for 
its  earlier  dissolution,  its  dissolution  by  one  partner  before 
that  time  has  expired  presents  dilRculties.  The  conduct  of 
the  other  partners  may  be  such  as  to  justify  a  dissolution, 
or  it  may  be  sought  at  the  mere  will  of  one  partner  with- 
out any  justification.  Although  the  authorities  are  not 
uniform,  the  true  principle  is  probably  found  in  the  same  dis- 
tinction which  was  observed  in  terminating  the  relation  of 
principal  and  agent,  i.  e.,  that  of  the  j^oicer  to  revoke  as  dis- 
tinguished from  the  right  to  revoke.  Every  partner  has 
doubtless  the  power  to  withdraw  from  the  firm  and  ter- 
minate the  right  of  his  partner  to  further  bind  him,  at  any 
time,  even  before  the  stipulated  period,  and  without  any 
other  reason  than  his  own  will;  but  when  he  so  revokes  in 
violation  of  his  agreement  he  subjects  himself  to  an  action 
for  damages  by  his  partner. 

§  240.  Same  sulyeet  —  Can  there  be  an  indissoluble 
partnership?  —  In  a  leading  case^  upon  this  subject  it  is  said 
that  the  right  of  one  i)artner  to  dissolve  the  partnership  "  is 
a  right  inseparably  incident  to  every  partncrsiiij).  There 
can  be  no  such  thing  as  an  indissoluble  partnershii).  Every 
partner  has  an  indefeasible  right  to  dissolve  the  partnership, 
as  to  all  future  contracts,  by  publishing  his  own  volition  to 
that  effect ;  and  after  such  publication  the  other  members 
of  the  firm  have  no  capacity  to  bind  him  by  any  contract. 
Even  where  partners  covenant  with  each  otluM-  that  the 
partnership  shall  ccmtinue  seven  years,  either  partner  may 
dissolve  it  the  next  day  by  proclaiming  his  determination 
for  that  ])ur|)ose;  the  only  conse(|uence  being  that  Ik;  tluM-cby 
subjects  himself  to  a  claim  for  damages  lor  a  breach  of  his 

1  Skinner  v.  Dayton  (1822),  19  Rep.  330,  Paige's  Partn.  Cas.  195; 
Johns.  (N.  Y.)  513,  10  Am.  Dec.  280.  Mason  v.  Connell  (1H30),  1  Wliart. 
To  same  effect:  Solomon  v.  Kirk-  (Pa.)  381;  Slciiimcr's  Aitpcal  (1808), 
wood  (1884),  55  Mich.  250,  31  N.  W.     58  Pa.  St.  10!),  liS  Am.  Due.  255. 

155 


§  241.]  LAW    OF   PARTNERSHIP. 

covenant.  The  power  given  by  one  partner  to  another  to 
make  joint  contracts  for  them  both  is  not  only  a  revocable 
power,  but  a  man  can  do  no  act  to  divest  himself  of  the  ca- 
pacity to  revoke  it." 

In  another  case,^  in  which  the  foregoing  language  was  ap- 
proved, the  court  said :  "  There  may  be  cases  in  which  equit}^ 
would  enjoin  a  dissolution  for  a  time,  Avhen  the  circum- 
stances were  such  as  to  make  it  specially  injurious;  but  no 
question  of  equitable  restraint  arises  here.  "When  one  part- 
ner becomes  dissatisfied  there  is  commonly  no  legal  policy 
to  be  subserved  by  compelling  a  continuance  of  the  relation, 
and  the  fact  that  a  contract  will  be  broken  by  the  dissolu- 
tion is  no  argument  against  the  right  to  dissolve.  Most 
contracts  may  be  broken  at  pleasure,  subject,  however,  to 
responsibility  in  damages.  And  that  responsibility  would 
exist  in  breaking  a  contract  of  partnership  as  in  other  cases." 

§24-1.  Same  subject.— But  this  right  of  one  partner  to 
dissolve  at  will  a  partnership  created  for  a  fixed  period  has 
been  vigorously  denied.  Thus,  Mr.  Justice  Story  has  said: 
"  Whenever  a  stipulation  is  positively  made  that  the  partner- 
ship shall  endure  for  a  fixed  period,  or  for  a  particular  ad- 
venture or  voyage,  it  would  seem  to  be  at  once  inequitable 
and  injurious  to  permit  any  partner,  at  his  mere  pleasure,  to 
violate  his  engagement  and  thereby  to  jeopard,  if  not  sacri- 
fice, the  whole  objects  of  the  partnership;  for  the  success  of 
the  whole  undertaking  may  depend  upon  the  due  accom- 
plishment of  the  adventure  or  voyage,  or  the  entire  time  be 
required  to  put  the  partnership  into  beneficial  operation. 
It  is  no  answer  to  say  that  such  a  violation  of  the  engage- 
ment may  entitle  the  injured  partners  to  compensation  in 
damages;  for,  independently  of  the  delay  and  uncertainty 
attendant  upon  any  such  mode  of  redress,  it  is  obvious  that 
the  remedy  may  be,  nay,  must  be,  in  many  cases  utterly  in- 
adequate and  unsatisfactory.  If  there  be  any  real  and  just 
ground  for  the  abandonment  of  the  partnership,  a  court  of 

1  Solomon  v,  Kirkwood,  supra. 
156 


TERMi:SrATION   OF   PAKTXEKSIIir.         [§§  242-244, 

equity  is  competent  to  administer  suitable  redress.  But 
that  is  exceedingly  different  from  the  right  of  the  partner, 
sxia  sjmnte,  from  mere  caprice,  or  at  his  own  pleasure,  to  dis- 
solve the  partnership." ' 

§  24'2.  Same  subject. —  Courts  hare  in  several  cases  en- 
joined a  dissolution  Avhere  it  would  work  irreparable  injury, 
or  denied  a  decree  for  dissolution  when  sought  in  violation 
of  the  agreement.  The  unsettled  condition  of  the  law  upon 
the  subject,  and  the  fact  that  a  dissolution,  conceding  the 
right  to  make  it,  may  often  be  impracticable  of  effect  with- 
out judicial  assistance,  render  it  usually  desirable,  if  not  nec- 
essary, to  have  recourse  to  a  court  of  equity  when  it  is 
sought  to  enforce  the  dissolution  of  a  partnership  created 
for  a  fixed  period.  The  reasons  which  will  justify  this  pro- 
ceeding Avill  be  discussed  in  later  sections. 

§  243.  Method  of  dissolving  by  act  of  partner.—  No  par- 
ticular method  of  dissolving  a  partnership  by  the  act  of  a 
partner  is  necessary.  A  voluntary  sale  or  transfer  of  his  in- 
terest by  one  partner  works  a  dissolution.  The  same  result, 
as  has  been  seen,  attends  an  involuntary  sale  by  judicial  pro- 
cess, as  upon  execution  against  the  partner.^ 

In  the  absence  of  such  a  sale,  an  unconditional  notice  of 
the  dissolution  given  by  the  partner  to  his  partners  is  suifi- 
cient  as  between  themselves.  Even  where  the  partnership 
was  created  by  written  instrument,  or  by  instrument  under 
seal,  a  dissolution  by  parol  is  usually  held  sufficient.' 

II.  Tkkmixation  nv  Act  or  Opkration  of  Law. 

§244.  What  methods  included.  —  Under  this  iiead  will 
be  included,  though  possibly  somewhat  illogically,  1,  diss(j- 

1  Story  on  Partnership,  §  273.  "See  Grci-n  v.  State  Bank  (189U), 

2  See  Blater  v.  Sanrls  (1882),  29  78  Tex.  2;  Swift  v.  Ward  (1890).  80 
Kan.  551;  Wilson  v.  Waugh  (1882),  Iowa,  700,  45  N.  W.  liei).  1044,  11 
101  Pa.  St.  233;  Carter   v.  Roland  U  R.  A.  303. 

(1880),  53  Tex.  540. 

137 


§§  245-247,]  LAW  OF  partnership. 

lutions  caused  by  the  mere  operation  of  law  in  case  of  the 
happening  of  particular  events,  and  2,  dissolutions  decreed 
by  law  at  the  suit  of  one  or  more  partners. 

1.  Events  Causing  Dissolution. 

§  245.  Death  of  a  partner. — Death  of  one  partner  operates 
to  instantly  dissolve  an  ordinary  partnership,  and  this  is  usu- 
ally held  to  be  true  even  though  the  partnership  articles 
provide  for  a  continuance  of  the  partnership  by  his  execu- 
tors or  others,  this  being  deemed  to  be  really  the  creation 
of  a  new  partnership  rather  than  the  mere  continuation  of 
the  old.i 

Where  there  were  more  than  two  partners,  the  death  of 
one  not  only  dissolves  the  partnership  as  to  him,  but  it  dis- 
solves the  partnership  between  the  survivors  also. 

§  246.  Insanity  of  a  partner. —  Although  opinions  have 
differed  upon  the  subject,  the  rule  seems  now  to  be  settled 
that  the  insanity  of  one  partner  does  not  of  itself  work  a 
dissolution  of  the  firm,  but  may  constitute  sufficient  ground 
to  justify  a  court  in  decreeing  a  dissolution.^ 

§  247.  Bankruptcy  of  a  partner. —  Bankruptcy  of  one 
partner — by  which  is  meant  the  public  or  statutory  condi- 
tion as  distinguished  from  mere  insolvency  —  operates  to  dis- 
solve the  partnership.' 

The  same  result  must  also  ensue  from  his  assignment  of 
all  of  his  property —  including  his  partnership  interest  —  for 
the  benefit  of  his  creditors,  or  from  the  seizure  and  sale  of 

1  See  Vincent  v.  Martin  (1885),  79  Y.  328,  23  N.  E.  Rep.  160,  163,  5  L. 

Ala.  540;  Exchange  Bank  v.  Tracy  R.  A.  410. 

(1883),    77    Mo.    594;     Schmidt    v.  2  See  Raymond  v.  Vaughn  (1889), 

Archer  (1887),  113  Ind.  365, 14  N.  E.  128  111.  256, 21  N.  E.  Rep.  566, 15  Am. 

Rep.  543;  'Durant  v.  Pierson  (1891),  St.  Rep.  112,  4  L.  R.  A.  440. 

124  N.  Y.  444,  26  N.  E.  Rep.  1095,  21  » See  Eustis  v.  Bolles  (1888),  146 

Am.  St.  Rep.  686;  Van  Kleeck  v.  Mass.  413,  16  N.  E.  Rep.  286,  4  Am. 

Hammell  (1891),  87  Mich.  599,  49  N.  St.    Rep.   327;     Siegel    v.   Chidsey 

W.  Rep.  872,  24  Am.  St.  Rep.  183;  (1857),  28  Pa.  St.  279,  70  Am.  Dec. 

Stewart  v.  Robinson  (1889),  115  N.  124. 

158 


TERMINATION   OF   PARTNERSHIP.  [§§  2-48-251. 

his  interest  at  the  suit  of  his  individual  creditors.  A  fortiori 
where  all  the  partners  unite  in  making  an  assignment  of  all 
of  the  partnership  property  for  the  benefit  of  its  creditors, 
involving  an  entire  suspension  and  winding  up  of  partner- 
ship affairs,  the  partnership  is  dissolved.^ 

§  2-i8.  Marriage  of  partner. —  Marriage  of  a  female  part- 
ner to  a  non-partner,  at  common  law,  but  not  under  most  of 
the  modern  statutes,  would  operate  to  dissolve  the  partner- 
ship. Even  under  such  statutes,  if  a  male  and  a  female  part- 
ner intermarry  the  partnership  would,  in  most  states,  be 
thereby  dissolved.- 

§  249.  Guardianship  of  a  partner. —  Guardianship  of  one 
partner,  by  virtue  of  which  the  management  of  his  property 
is  taken  from  him,  operates  probably  to  dissolve  the  part- 
nership, and  at  all  events  would,  like  insanity,  be  a  ground 
for  decreeing  a  dissolution.' 

§  250.  War  between  countries  of  partners. —  War  be- 
tween the  countries  of  which  the  partners  are  citizens  at 
least  suspends,  and  probably  works  a  dissolution  of,  a  com- 
mercial partnership.* 

2.  Termination  hy  Decree  of  Court. 

%  251.  Declaring  void. —  Before  taking  up  the  question 
of  dissolution  by  decree,  the  present  seems  a  convenient  place 
for  mentioning  a  remedy  in  the  same  line,  but  of  far  more 
extensive  effect.  Thus,  instead  of  dissolving  the  j^artnership 
and  thereby  terminating  it  from  the  date  of  the  decree,  a 
court  of  equity  may  find  sufficient  ground  for  rescinding  the 
contract  of  partnership  altogether  and  declaring  the  part- 

1  See  Wells  V.  Ellis  (1885),  C8  Cal.  3  See  Parsons  on  Partnership, 
243,  9  Pac.  Rep.  80.  §  303. 

2  See  Brown  v.  Chancellor  (1884),  <  Wood  v.  Wilder  (1870).  43  N.  Y. 
61  Tex.  437;  Bassett  v.  Shepardson  164,  3  Am.  Rep.  084;  Hubbard  v. 
(1883),  52  Mich.  3, 17  N.  W.  Rep.  217.  Matthews  (1873).  54  N.  Y.  43,  13 
See,  also,  anie,  §  25.  Am.  Rep.  502:   Oris  wold  v.  Wad- 

dington,  10  Johns.  (N.  Y.)  438,  401. 
159 


g  252.]  LAW    OF    PARTNERSHIP. 

nership  void  ah  initio.  This  may  be  done  Avlicre  one  part- 
ner lias  been  induced  through  fraud,  deception  or  oppression 
to  enter  into  the  partnership  in  the  first  instance.*  "  Where 
a  person  is  induced,"  says  Mr.  Justice  Lindley,'^  "  by  the  false 
representations  of  others  to  become  a  partner  Avith  them, 
the  court  will  rescind  the  contract  of  partnership  at  his  in- 
stance ;  and  will  compel  them  to  repay  him  whatever  he  may 
have  paid  them,  with  interest,  and  to  indemnify  him  against 
all  the  debts  and  liabilities  of  the  partnership,  and,  if  the  de- 
fendants have  been  guilty  of  fraud,  against  all  claims  and 
demands  to  which  he  may  have  become  subject  by  reason 
of  his  having  entered  into  partnership  with  them,  he  on  the 
other  hand  accounting  to  them  for  what  he  may  have  re- 
ceived since  his  entry  into  the  concern." 

§  252.  Bissolviiig  in  equity.— Many  causes,  however, 
may  exist  which  Avill  justify  a  dissolution  of  the  firm  which 
would  not  suflBce  to  render  the  partnership  void  ah  initio. 

Of  the  causes  for  which  a  court  will  thus  decree  a  disso- 
lution several  examples  may  be  given.  The  courts  of  law, 
it  may  be  noticed,  have  no  jurisdiction  for  this  purpose,  and 
the  relief  can  be  sought  only  in  equity.  The  grounds  for 
the  intervention  of  the  court  are  usually  acts  occurring  since 
the  formation  of  the  partnership,  but  they  may  be  acts  or 
events  preceding  its  formation.  The  occasion  for  seeking  a 
dissolution  in  a  court  of  equity  arises  usually  only  in  those 
cases  in  which  it  was  to  continue  for  a  definite  term  not  yet 
expired,  because,  as  has  been  seen,  a  partnership  at  will 
merely  is  ordinarily  dissolvable  at  any  time  by  the  mere 
act  of  the  parties.^ 

The  fact  that  the  articles  provide  for  dissolution  upon 

1  See  Newbigging  V.  Adam  (1886),  U.  S.  578;  Hynes  v.  Stewart  (1850), 

L.  R.  34  Ch.  Div.  582;  Mycock  v.  10  B.  Moiiv  (Ky.)  429;  Smith  v.  Ev- 

Beatson   (1879),   13  Ch.   Div.    384;  erett  (1879),  126  Mass.  304;  Richards 

Fogg  V.  Johnston   (1855).   27   Ala.  a\  Todd  (1879),  127  Mass.  167. 

432,   62  Am.   Dec.  771;  Howell  v.  ^  Lindiey  on  Partnersliip,  vol.  II 

Harvey  (1843),  5  Ark.  270,  39  Am.  (Swell's  ed.),  482. 

Dec  376;  Oteri  v.  Scalzo  (1891),  145  ^  See  ante,  §  237, 

160 


TERMINATION  OF  PARTNERSHIP.    [§§  253-255. 

notice  given  by  one  partner  to  the  other  does  not  prevent 
an  application  to  a  court  of  equity  for  dissolution.^ 

§253.  Causes  for  dissolution  —  Fraud. —  Fraud  in  the 
creation  of  a  partnership,  as  has  been  seen,  may  be  a  suffi- 
cient ground  for  a  rescission  of  the  contract,  but  it  may 
also  be  treated  as  a  reason  for  decreeing  a  dissolution.- 

§  25+.  lusauity  or  incapacity  of  partner. —  The  in- 
sanity or  other  physical  incapacity  of  one  partner,  while  not 
sufficient  of  itself,  as  has  been  seen,  to  terminate  the  partner- 
ship as  matter  of  law,  will,  if  of  such  a  character  as  to 
])ermanently  disable  the  partner  afflicted  from  performing 
the  duties  of  the  partnership,  be  sufficient  ground  for  de- 
creeing a  dissolution.* 

§  255.  Misconduct  of  a  partner. —  The  misconduct 

of  one  partner,  other  than  the  one  praying  for  relief,  if  of 
such  a  kind  and  degree  as  to  render  the  further  prosecution 
of  the  partnership  inexpedient,  injurious  or  impossible,  may 
bs  ground  for  decreeing  its  dissolution.  Courts  will  not  in- 
terfere upon  every  disagreement  between  the  partners,  nor 
"  enter  into  a  consideration  of  mere  partnership  squabbles," 
but  they  will  interfere  where  the  misconduct  of  one  partner 
or  the  dissension  between  the  parties  is  so  serious  as  to  en- 
danger the  prosperity  of  the  firm  or  destroy  the  confidence 
which  must  exist  between  partners.  Thus,  abandonment  of 
the  business  by  one  partner,  his  persistent  violation  of  the 
articles,  excluding  his  copartner  from  participation,  dishon- 
esty, gross  misconduct,  and  the  like,  have  been  held  suffi- 
cient.* 

•Adams  v.  Shewalter  (1894),  139  1   Cox,   107:    Whitw.'ll  v.    Arthur 

Ind.  178,  38  N.  E.  Rep.  607.  (1805),  35  Beav.  MO;  Jones  v.  Noy 

2 See  Oteii  v.  Scalzo  (1891),  145  (1833),  2  M.  &  K.  125. 
U.  S.  578,  12  Sup.  Ct.   Rep.   895,30        ^.Sce  S.-ifrliorttier  v.  Wei.ssorilx>rn 

L.   ed.   824;   Rosenstein   v.    Burns  (1^09).  20  N.  J.  Eq.  172;  l{<;s."n.stein 

(1882),  41  Fed.  Rep.  841.  v.  Burns  (18H2),  41  Fed.  Rep.  841; 

» See  Raymond  v.  Vaughn  (1889),  Groth  v.  Payment  (1890),  79  Mit-h. 

128  111.  256,  15  Am.  St.   Rep.  112,  4  290;  Cottle  v.  U'itch  (1.W8),  35  Cul. 

L.R.A.440;  Sayerv.  Benuet  (1783).  434;    Holla  Jay  v.  Elliott  (1879),  8 
11                                            101 


§§  256,  257.]  LAW  OF  paktneeship. 

§  256.  Must  not  be  misconduct  of  partner  seeking 

dissolution. —  But  the  partner  who  is  himself  at  fault  will 
not  be  permitted  to  make  use  of  his  own  misconduct  to  se- 
cure a  dissolution.  "A  party  who  is  the  author  of  the  ill- 
feeling  between  himself  and  his  partners,"  said  the  court  in 
one  case,^  "  ought  not  to  be  permitted  to  make  the  relation 
he  has  induced  the  ground  of  a  dissolution  of  the  partner- 
ship. His  conduct  may  have  been  taken  with  a  view  to 
that  very  result,  and  it  would  be  inequitable  to  allow  him 
advantage  from  his  own  wrongful  acts.  It  would  allow  one 
partner,  at  his  election,  to  put  an  end  to  his  own  deliberate 
contract,  when  the  other  had  been  guilty  of  no  wrongful 
act  or  omission  of  duty." 

§  257.  Impossibility  of  success. —  So,  though  there 

be  no  misconduct,  if  the  further  prosecution  of  the  partner- 
ship with  profit  or  success  has  become  impossible  or  imprac- 
ticable, if  its  purpose  or  object  has  become  unattainable,  if 
it  is  found  that  the  scheme  or  theory  upon  which  the  part- 
nership was  based  was  illusory  or  erroneous, — in  these  and 
like  cases  the  court  may  decree  its  dissolution,  as  it  is  not 
to  the  advantage  of  any  one  that  the  business  should  be  con- 
tinued under  such  circumstances.^ 

Oreg.  84;  Harrison  v.  Tennant  Fairthorne  v,  Weston  (1844),  3 
(1856),  21  Beav.  482;  Essel  v.  Hay-    Hare,  387. 

ward  (1860),  30  Beav.  158.  2  See  Rosenstein  v.  Burns  (1882), 

I  Gerard  V.  Gateau  (1876),  84  111.     41  Fed.  Rep.  841;  Holladay  v.  El- 

131,  25  Am.  Rep.  438.    See,  also,     liott  (1878),  8  Oreg.  84;  Jennings  v. 

Baddeley  (1856),  3  K.  &  J.  78. 
162 


CHAPTER  XY. 


OF  NOTICE  OF  THE  DISSOLUTION. 


g  258.  The  necessity  of  notice. 

259.  In  what  cases   required  — 

Not  on  dissolution  by  mere 
operation  of  law. 

260.  Required  on  dissolution 

by  or  through  act  of  par- 
ties. 

261.  To  whom  notice  required. 


§  262. 

263. 
264 


265. 


266. 


How  notice  given  —  1.  To 
previous  customers. 

2.  To  strangers. 

Who  should  give  notice  — 
Actual  and  ostensible  part- 
ners. 

Dormant    and    secret 

partners. 

Effect  of  not  giving  notice. 


§  258.  The  necessity  of  notice.—  The  creation  of  a  part- 
nership and  the  transaction  of  its  business  are  notice  to  the 
public  that  a  rehition  has  been  entered  into  to  which  the  law 
attaches  certain  incidents  and  liabilities.  If  this  relation  is 
terminated,  it  would  seem  to  be  a  natural  consequence  that 
some  notice  of  the  fact  should  also  be  given,  if  it  is  desired 
to  bring  those  incidents  and  liabilities  to  an  end.  And  notice 
is  required  by  law  in  many  cases.  We  are  now  to  consi<ler 
when  notice  is  required,  to  whom,  and  how  it  may  be  given. 

§  250.  In  what  cases  notice  is  re(inire(l  —  Not  on  disso- 
lution by  mere  operation  of  law. —  As  has  been  seen,  the 
dissolution  may  result  cither  from  the  oct  of  the  law  or  the 
act  of  the  parties.  The  causes  which  will  operate  to  dissolve 
the  partnership  b}'  mere  operation  of  law  have  been  consid- 
ered, and  it  is  obvious  that  the  existence  of  these  causes  is 
usually  accompanied  Ijy  facts  and  circumstances  which  must 
of  themselves  give  publicity  to  the  event.  Thus,  the  fact 
that  one  of  the  partners  has  died  is  usually,  if  not  always, 
accompanied  by  circujustances  wliicii  must  giv(^  publicity  to 
the  fact.  The  same  is  true  of  tli(;  b;i n loiq it cy  ol  a  jiartncr, 
or  the  declaration  of  war*  between  the  countries  of  wliicii 


§§  260,  261.] 


LAW    OF    PARTNEESHIP. 


partners  respectively  are  citizens.  Tiie  result  of  this  neces- 
sary and  inherent  publicity  is  the  rule  that  no  notice  is 
required  where  the  partnership  is  dissolved  upon  the  hap- 
pening of  one  of  the  events  which  terminate  a  partnership 
by  mere  operation  of  law.^ 

§  260.  Required  on  dissolution  by  or  through  act 

of  parties. —  But  in  the  case  of  a  dissolution  by  or  through 
the  act  of  parties,  no  such  publicity  is  necessarily  incident 
and  therefore  a  different  rule  prevails.  In  such  cases,  whether 
the  partnership  comes  to  an  end  by  lapse  of  time  or  by  mutual 
consent,  or  by  the  act  of  one  of  the  partners,  notice  must  be 
given. 

It  must  be  given  also  where  the  partnership  is  dissolved 
by  judicial  decree  at  the  suit  of  one  of  the  partners. 

§361.  To  whom  notice  retinired.— Kotice  may  be  re- 
quired for  two  purposes  and  to  two  classes  of  persons: 

1.  If  a  partner  intends  to  dissolve  the  partnership  in  pur- 
suance of  his  power  to  do  so,  he  must  give  his  partners  no- 
tice of  that  fact,  both  as  a  means  to  the  dissolution,  and  also 
for  the  purpose  of  withdrawing  the  powers  conferred  upon 
them  at  the  time  the  partnership  was  created.  This  ques- 
tion does  not  frequently  arise,  but  the  occasion  exists.^ 


1  See  Griswold  v.  Waddington 
(1818),  15  Johns.  (N.  Y.)  57,  16  id. 
438;  Bank  v.  Matthews  (1873),  49 
N.  Y.  12;  Eustis  v.  Bolles  (1888), 
146  Mass.  413,  4  Am.  St.  Rep.  327, 
16  N.  E.  Rep.  286.  In  this  last  case 
it  is  said:  ''The  bankruptcy,  like 
the  death  of  a  partner,  dissolves 
the  partnership;  and,  as  it  is  a 
public  and  notorious  proceeding, 
all  creditoi'S  are  bound  to  take  no- 
tice of  it,  and  no  further  notice 
need  be  given.  The  publication  of 
bankruptcy  or  insolvency  proceed- 
ings is  legal  notice  to  all  persons 
by  which  they  are  bound.    Story 


on  Partnership,  sees.  332-336;  Ar- 
nold v.  Brown,  24  Pick.  (Mass.)  89, 
94,  35  Am.  Dec.  296;  Marlett  v. 
Jackman,  3  Allen  (Mass.),  287;  But- 
ler V.  Mullen,  100  Mass.  453." 

2  Thus,  in  Eagle  v.  Bucher  (1856), 
6  Ohio  St.  295,  67  Am.  Dec.  342,  it 
is  said :  "  That  a  partnership  may 
be  dissolved  by  the  act  of  one  of 
the  partners  we  do  not  . 
intend  to  impugn.  That  is  too 
well  settled  to  be  now  questioned. 
But  to  effect  that  purpose,  the  act 
must  be  done  with  a  view  to  its 
accomplishment.  It  should  be 
communicated  at  once  to  the  other 


164 


NOTICE   OF   DISSOLUTION.  [§  262. 

2.  But  the  question  most  frequently  arising,  and  the  one 
giving  most  difficulty,  is  the  question  of  notice  to  third  per- 
sons. Of  these  there  are  two  classes :  those  who  have  had 
previous  dealings  with  the  firm,  and  those  who  have  not. 
The  former  have  necessarily  knowledge  of  the  existence  of 
the  firm,  and  have  had  occasion  to  rely  upon  the  credit  of 
its  members,  while  the  latter  have  not  necessarily  known 
of  it,  and  have  been  brought  into  no  personal  relation  with 
it,  Xotice  to  both  classes  may  be  necessary —  to  the  former 
because  they  have  already  known  and  trusted  to  the  part- 
nership; to  the  latter  because  if  they  do  not  alread}'  know 
of  its  existence,  they  may  learn  of  it  and  be  deceived  by 
supposing  it  to  continue;  but  the  same  kind  of  notice  is 
not  required  for  both  classes.     Thus  — • 

§  262.  How  notice  given  —  1.  To  tlioso  who  have  had 
dealings  with  the  firm. —  Persons  of  the  fii'st  class,  having 
actual  notice  of  the  existence  of  the  partnership,  and  having 
had  dealings  Avith  it,  should  be  given  actual  notice  of  its  dis- 
solution. It  is  immaterial  how  the  notice  is  given  or  by 
whom;  the  important  thing  is  that  they  receive  it. 

In  one  case,^  after  referring  to  the  method  of  giving  notice 
to  strangers,  the  court  said :  "  The  rule  is  different  in  respect 
to  persons  who  have  dealt  with  the  firm  before  the  dissolu- 
tion. The  rule  in  such  cases  in  this  state  requires  tliat,  to 
relieve  a  retiring  partner  from  subsequent  transactions  in 
the  partnership  name,  notice  of  the  dissolution  must  be 
brought  home  to  the  persons  giving  credit  to  the  })artner- 
ship.     If,  in  any  way,  by  actual  notice  served,  or  by  seeing 

members  of  the  firm.     They  should  Abbot    v.   .Jolmson,  ^2    N.    II.    9; 

be  advised  of  the  new  relations  Jones  v.  Lloyd,  L.  K.   IH  E(i.  205, 

created  by  the  witlidrawal   of  a  271. 

member,  or  a  transfer  of  his  inter-        i  Anstin  v.  Holland  (1877).  fiJ)  N.  Y. 

est  in  the  concern.     Their  future  571,  25  Am.  Rep-  -l'*-     In  this  <-aKe 

relations  toward  each  other,  and  it  was  liclil  that  llic  nu-re  mailing 

their  ymnsuit  of  the  particular  en-  of  a  notice  of  dissohition  was  not 

terprise, depend  on  the  acquisition  sufhcieut;  it  must  ho  rcifivcd. 
of    such    knowledge."      See,  also. 

105 


§  263.]  LA.W    OF    PARTNERSHIP. 

the  publication  of  the  dissolution,  or  by  information  derived 
from  third  persons,  the  party,  at  the  time  of  the  dealing,  is 
made  aware  of  the  fact  that  the  partnership  has  been  dis- 
solved, the  contract  will  not  bind  the  firm.  It  is  sufficient 
to  exempt  the  firm  from  liability  that  the  person  so  con- 
tracting with  a  partner  in  the  firm  name  knew  or  had  rea- 
son to  believe  that  the  partnership  had  been  dissolved,  but 
this  must  appear  and  be  found  by  the  jury,  or  else  the  con- 
tract will  be  treated  as  the  contract  of  the  partnership." 

A  common  method  of  giving  the  notice  is  by  personal 
communication  or  b}^  letter  or  circular  addressed  to  and  re- 
ceived by  all  persons  with  whom  the  firm  has  had  dealings. 
Mailing  the  notice,  properly  addressed,  raises  a  presumption 
of  its  due  receipt,  but  the  presumption  is  not  conclusive  and 
actual  receipt  must  be  shown.*  Mere  publication  in  a  paper 
is  obviously  not  enough;  it  must  appear  further  that  the 
party  to  be  notified  saw  it.^ 

§  263.   How  notice  given ^2.  To  strangers. —  Of  the 

persons  who  have  not  had  dealings  with  the  firm,  there  are 
likewise  two  classes-^ those  who  knew  of  the  partnership  but 
had  not  dealt  with  it,  and  those  who  did  not  know  of  it,  prior 
to  its  dissolution.  As  to  the  latter  class,  it  is  said  that  no  no- 
tice at  all  is  necessary,^  upon  the  ground  that,  as  they  did  not 

1  Meyer  v.  Krohn,  114  111.  574.  enough.     Robinson  v,  Floyd  (1893), 

2  Notice  of  dissolution  was  pub-  159  Pa.  St.  165,  38  Atl.  Rep.  258. 
lished  in  a  paper  and  a  copy  of  the  See,  also,  Nicholson  v.  Moog  (1880), 
paper  with  a  red  line  drawn  about  68  Ala.  471 :  Stoddard  Mfg.  Co.  v. 
the  notice  was  mailed  to  a  farmer  Krause  (1889),  27  Neb.  83,  42  N.  W. 
dealer  residing  in  another  town.  Rep.  913;  Long  v.  Garnett  (1883), 
Held  not  alone  sufficient.  Haynes  59  Tex.  229;  Gilchrist  v.  Brande 
V.  Carter,  12  Heisk.  (Tenn.)  7,  27  (1883).  58  Wis.  184,  15  N.  W.  Rep. 
Am.  Rep.  747.  Proof  of  the  publi-  817;  Backus  v.  Taylor  (1882),  84Ind. 
cation  of  the  notice  in  a  news-  503;  Sibley  v.  Parsons  (1892),  93 
paper  is  not  sufficient  where  it  is  Mich.  538,  53  N.  W.  Rep.  786. 

not  shown  that  the  other  party  3  gee  Austin  v.  Appling  (1891),  88 
either  took  or  read  the  paper.  Rose  Ga.  54.  13  S.  E.  Rep.  955;  Svvigert 
V.  Coffield,  53  Md.  18,  36  Am.  Rep.  v.  Aspden  (1893),  52  Minn.  565,  54 
389.      Mere     publication     is    not     N.  W.  Rep.  738. 

166 


NOTICE    OF    DISSOLUTION. 


[§  2G3. 


learn  of  the  existence  of  the  partnership  until  it  had  actually 
been  dissolve:!,  thev  could  have  no  reason  for  holdino-  it  lia- 
ble;  and  this  is  doubtless  correct  where  no  element  of  estop- 
pel is  involved,  though  notice  by  publication,  even  in  such 
cases,  v^^ould  be  the  safer  course.  As  to  the  former,  general 
notice  is  enough,  and  this  notice  may  be  given  in  a  variety 
of  ways,  though  publication  for  a  reasonable  period  in  a 
newspaper  of  general  circulation  at  the  place  where  the 
]jartnership  business  is  carried  on  is  deemed  the  most  ef- 
fectual and  appropriate.^ 


^Thus,  in  Lovejoy  v.  Spafford 
(1876),  93  U.  S.  430,  440,  it  is  said: 
"We  think  it  is  not  an  absolute, 
inflexible  rule  that  there  must  be 
a  publication  in  a  newspaper  to 
protect  a  retiring  partner.  That 
is  one  of  the  circumstances  con- 
tributing to  or  forming  the  general 
notice  required.  It  is  an  important 
one,  but  it  is  not  the  only  or  an  in- 
dispensable one.  Any  means  tliat, 
in  the  language  of  Mr.  Bell,  are 
fair  means  to  publish  as  widely  as 
possible  the  fact  of  dissolution,  or 
which,  in  the  words  of  Judge  Ed- 
monds, are  public  and  notorious  to 
put  the  public  on  its  guard;  or,  in 
the  words  of  Judge  Nelson,  notice 
in  any  other  public  and  notorious 
manner:  or,  in  the  language  of  Mr. 
Verplanck.notice  by  ad  vertisement 
or  otherwise,  or  by  withdrawing 
the  extei'ior  indications  of  partner- 
ship, and  giving  the  ])ublic  notice 
in  the  manner  usual  in  the  com- 
munity wh(;re  he  resides,  are  means 
and  circumstances  proper  to  be 
considered  on  tlie  question  of  no- 
tice." See,  also,  Ellison  v.  Sexton 
(1890).  105  N.  C.  3m,  18  Am.  St.  Rep. 
907,  11  S.  E.  Rep.  180;  Polk  v.  Oliver 


(1879),  56  Miss.  566;  Ricliards  v.  But- 
ler (1880).  65  Ga.  593:  Central  Nat. 
Bank  v.  Frye  (1889),  148  Mass.  498, 
20  N.  E.  Rep.  325. 

In  Ellison  v.  Sexton,  supra,  the 
court  said:  "It  is  often  difficult  to 
determine  what  amounts  to  due 
and  sufficient  notice  of  the  retire- 
ment of  a  partner;  but  the  evidence 
to  prove  it  should  be  sucii  as  would 
reasonably  warrant  the  jury  in 
finding  the  fact  of  notice;  that  the 
party  to  be  charged  with  it  act- 
ually had  it,  or  might,  by  reason- 
able diligence,  have  learned  of  the 
dissolution  of  partnersliip  and  the 
retirement  of  the  i)artner  sought 
to  be  charged,  from  tlie  means  and 
opportunity  supplied  or  alForded 
for  the  purpose  of  giving  notice  of 
the  same.  Generally,  the  reason- 
ableness of  the  notice  will  be  a 
mixed  question  of  law  and  fact  to 
be  submitted  to  tlie  jury,  under 
proper  instructions  of  the  court, 
asto  wlietlier,  under  all  tlie  attend- 
ing circumstances  of  the  p;ir(i(ii 
lar  case,  it  was  suflicicnt  (o  war 
rant  tlie  inference  of  actinil  or 
constructive  knowlcilge  of  the  dis- 
solution." 


167 


§§  261-266.]  LAW    OF    PAKTNEESHIP. 

§  264.  Who  should  give  uotice  — Actual  and  ostensible 
partners. —  jSTotice  of  the  dissolution  may  be  given  by  either 
partner,  and  where  the  partnership  is  dissolved  by  mutual 
consent  all  of  the  ])artners  usually  unite  in  giving  it.  Each 
partner  who  withdraws  from  a  firm  is  interested  in  giving 
notice,  for,  as  will  be  seen,^  where  notice  is  required,  a  part- 
ner wha  retires,  whether  by  sale  of  his  interest  or  any  other 
means,  will,  until  notice  is  duly  given,  continue  liable  as  a 
partner  to  those  formerly  dealing  with  the  firm. 

If  the  partner  desiring  to  give  notice  is  prevented  by  his 
copartners  from  exercising  that  right,  they  may  be  com- 
pelled to  do  what  may  be  necessary  to  enable  notice  to  be 
given,  as  to  sign  advertisements  or  join  in  notices  to  former 
customers.'^ 

§  265.  Dormant  and  secret  partners. —  A  dormant 

partner,  i.  e.,  one  both  secret  and  passive,  is  not  bound  to 
give  notice  of  his  withdrawal,  for  no  one  of  the  public  knew 
of  his  connection  with  the  firm,  and  no  one,  therefore,  could 
have  relied  upon  it ;  but  a  mere  secret  partner  is  bound  to 
give  notice  of  his  withdrawal  to  those  who  knew  of  his  con- 
nection with  the  firm,  though  not  to  those  who  had  no 
knowledge  of  it.  A  retiring  dormant  partner  would  also 
be  liable  to  one  who  knew  of  his  existence,  if  he  were  not 
given  notice  of  his  withdrawal.^ 

§266.  Effect  of  not  giving  notice. —  Where  a  partner- 
ship is  dissolved  or  a  known  member  of  the  firm  retires, 
until  the  dissolution  or  retirement  has  been  duly  notified 

1  See  post,  §  266.  v.  Appling  (1891),  88  Ga.  54, 13  S.  E. 

21Lindleyon  Partnership  (Evv-  Eep.   955;  Niissbaiimer  v.   Becker 

ell's  ed.),  214;  Troughton  v.  Hun-  (1877),  87  111.  281,  29  Am.  Rep.  53; 

ter  (1854),  18  Beav.  470;  Hendry  v.  Lieb  v.  Craddock  (1888),  87  Ky.  525, 

Turner  (1886),  33  Ch.  Div.  355.  9  S.  W.  Rep.  838;  Pitkin  v.  Benfer 

3  See   Elmira   Iron   Co.  v.  Harris  (1892),  50  Kan.   108,  31   Pac.  Rep. 

(1891),  124  N.  Y.  280,  28  N.  E.  Rep.  695,  34  Am.  St.  Rep.  110;  Brown  v. 

541;  Elkinton  v.  Booth   (1887),  143  Foster  (1894),  —  S.  C.  — ,  19  S.  E. 

Mass.  479,  10  N.  E.  Rep.  460,  Austin  Rep.  299. 

168 


NOTICE    OF   DISSOLUTION. 


[§  266. 


the  power  of  each  partner  to  bind  the  others  by  contract 
with  third  persons  remains  unimpaired,  although  as  between 
themselves  such  authority  is  at  an  end.^ 

The  retiring  partner,  in  the  absence  of  notice,  remains 
liable  also,  it  is  said,  for  the  torts  committed  subsequently 
by  his  late  partners  or  their  agents  in  the  line  of  their  for- 
mer business.^ 


1  See  Morrill  v.  Bissell  (1894),  99 
Mich.  409,  and  note;  Prentiss  v. 
Sinclair  (1831),  5  Vt.  149,  26  Am. 
Dec.  288.  and  note;  Austin  v.  Hol- 
land (1877),  69  N.  Y.  571,  25  Am. 
Rep.  246. 


2  See  1  Lindley  on  Partnership 
(Ewell's  ed.),  214,  citing  Stables  v. 
Eley  (1825),  1  Car.  &  P.  614.  But 
see  Pollock's  Digest  of  Partner- 
ship (6th  ed.),  54. 


169 


CHAPTER  XYI. 


OF  THE  EFFECT   OF  DISSOLUTION   UPON   THE  POWERS   OF 

PARTNERS. 


§  267.  In  general. 

268.  Rights,  powers  and  liabili- 

ties of  surviving  partner. 

269.  How  where  he  contin- 

vies  business  under  provis- 
ions of  will. 

270.  Liability  of  estate  of  de- 
ceased partner. 


271.  Powers    of    partners    after 

dissolution — Continue  for 
purpose  of  closing  up  the 
business. 

272.  Have  no  power  to  cre- 
ate new  obligations. 

273.  Powers  of  settling  or  liqui- 

dating partner. 


§  267.  In  general. —  The  firm  being  dissolved  for  some 
sufficient  reason,  and  due  notice  having  been  given  when 
necessary,  it  remains  to  be  considered  what  is  the  effect  of 
the  dissolution,  particularly  as  respects  the  powers  and  du- 
ties of  the  partners.  For  reasons  which  wall  be  obvious, 
dissolution  by  death,  which  completely  removes  one  of  the 
partners,  presents  an  aspect  entirely  different  from  that  pre- 
sented when  dissolution  results  from  any  other  cause,  leav- 
ing all  partners  alive  and  capable  or  desirous  of  acting. 
The  condition  of  the  surviving  partner,  therefore,  must  be 
separately  considered. 

§  268.  Rights,  poAvers  and  liaMlities  of  the  surviving 
partner. —  The  death  of  one  partner  operates,  as  has  been 
seen,  to  dissolve  the  partnership.  Upon  dissolution  by  death 
the  entire  legal  title  to  all  the  partnership  assets  passes  to 
the  surviving  partner  or  partners.^     They  alone,  to  the  ex- 


iln  Barry  v.  Briggs  (1871),  22 
Mich.  201,  the  rule  is  stated  that  a 
sole  surviving  partner  has  the  en- 
tire legal  title  to  all  the  partner- 
ship assets.  He  has  the  right, 
acting  honestly  and  with  reason- 
able discretion  and  diligence,  to 


dispose  cf  them  as  he  pleases,  to 
settle  all  debts  against  the  concern, 
to  make  any  compromise  he  may 
deem  necessary,  and  to  turn  the 
assets  into  an  available  and  dis- 
tributable form.  As  to  partner- 
ship real  estate,  see  ante,  §  111. 


170 


EFFECT,  ETC.,  TPON    POWEKS    OF    PAUTXERS.  [§  20S. 

elusion  of  the  repressntatives  of  the  deceased  partner,  have 
the  right  to  the  possession  of  the  partnership)  jn-operty,  and 
to  collect  or  receive  debts  due  the  firm.  Causes  of  action, 
at  law,  survive  to  or  against  them,  and  therefore  they  alone 
are  the  ones  to  sue  or  be  sued  in  respect  to  jmrtuership  dcal- 
ings.i  But  while  they  have  the  legal  title,  they  hold  it  in 
trust  for  the  firm,  and  it  is  their  duty  to  apply  the  assets  to 
the  payment  of  the  debts,  to  close  up  the  business  with  rea- 
sonable promptness,-  and  to  account  to  the  representatives 
of  the  deceased  partner  for  his  share  of  the  final  balance.* 
In  their  dealings  with  partnership  assets,  the  surviving  part- 
ners are  charged  with  all  the  duties  of  fair  dealing  and  re- 
gard for  the  interests  of  the  firm  which  are  required  of 
other  trustees.*  While  engaged  in  closing  up  the  business, 
the  surviving  partners  may  exercise  such  powers  as  are 
reasonably  necessar}^  to  accomplish  that  purpose.  Thus  they 
may  sell,  mortgage  or  pledge  the  property,  borrow  money,-' 

1  The  last  surviving  partner  or  McCall  (1894),  141  N.  Y.  437,  36  N. 
partners  are  to  sue  and  be  sued  in  E.  Rep.  498,  38  Am.  St.  l^ep.  807. 
respect  of  partnership  affairs.  1  He  is  bound  to  keep  accurate  ac- 
Lindlej'  on  Partnership  (Evvell's  counts  and  to  keep  tlie  representa- 
ed.),  288.  tives  of  the  deceased   partner  in- 

2  See  Clay  v.  Field  (1888),  34  Fed.  formed  of  all  that  properly  con- 
Rep.  375.  Paige's  Partn.  Cas.  21-3.  cernsthem.  Heath  v.  Waters  (1879), 

3  See  Valentine  v.  Wysor  (1890),  40  Mich.  457. 

123  Ind.  47,  7  L.  R  A.  788.  5  Thus  in  Durant  v.  Pierson  (1891), 
*  A  surviving  partner  occupies  124  N.  Y.  444,  26  N.  E.  Rep.  1095,  21 
the  position  of  trustee,  and  cannot  Am.  St.  Rep.  68(5,  12  L.  R.  A.  146, 
be  permitted  to  make  gain  for  ])im-  the  court  say:  "When  a  partner- 
self  at  the  expense  of  the  estate  of  ship  is  dissolved  by  the  death  of  a 
a  deceased  partner.  Little  v.  Cald-  partner,  the  survivor  is  entitled  to 
well  (1894),  101  Cal.  553,  36  Pac.  the  possession  and  control  of  the 
Rep.  107,  40  Am,  St.  Rep.  89;  Gal-  joint  property  for  the  purpose  of 
braith  v.  Tracy  (1894),  153  111.  54,  closing  its  business,  and  to  tiiat 
38  N.  E.  Rej).  937,  46  Am.  St.  Rep.  end  and  for  that  i)uri)ose  he  may. 
867,  28  L.  R.  A.  129.  He  cannot  according  to  the  sctth-d  principles 
Ijuy  of  or  sell  to  himself.  Denholm  of  the  law  of  parlncrsliij),  admin- 
V.  McKay  (1889),  148  Mass.  434,  19  istcr  tlie  alfairs  of  tli.-  lirm.and  by 
N.  E.  Rep.  551,  12  Am.  St.  Rep.  574.  sale,  mortgage,  or  otln-r  rcasoiialile 
If  he  misappropriates  the  assets,  disposition  nf  the  property,  m.ike 
equity  will  give  relief.     Russell  v.  ]>rovisioii    lor   meeting   its  ol)liga- 

171 


269.] 


LAW    OF   rAKTNERSHIP. 


or  make  an  assignment  for  the  benefit  of  creditors.^  They 
should  complete  the  executory  contracts  into  which  the 
firm  had  entered,  and  for  this  purpose  have  the  power  to 
purchase  materials,  employ  assistance  or  make  such  other 
incidental  contracts  as  the  case  reasonably  requires.'-  Upon 
the  death  of  the  sole  surviving  partner  before  the  estate 
is  closed,  his  powers  and  liabilities  pass  to  his  administrator 
or  executor.''  The  right  of  the  survivor  to  compensation 
has  already  been  referred  to  in  a  previous  section.'* 

§269.  Same  subject  ^Coiitinuiug  business  under  pro- 
visions of  will. — -The  authority  of  the  surviving  partners 
is  to  close  up  and  not  to  continue  the  partnership  affairs, 
and  they  have  therefore  no  right  to  make  new  contracts, 
engage  in  fresh  enterprises  or  to  carry  on  the  partnership 
business  for  any  longer  period  than  is  reasonably  necessary 
to  enable  the  affairs  to  be  closed  up  without  unnecessary 
loss  or  injury.  If,  in  violation  of  their  duty,  they  do  con- 
tinue the  business,  they  may  be  restrained  by  injunction,  or 


tions.  He  may,  for  that  pvirpose, 
borrow  money,  and  give  a  valid 
pledge  of  the  copartnex'ship  prop- 
erty for  its  repayment.  Williams 
V.  Whedon,  109  N.  Y.  333,  4  Am. 
St.  Rep.  460;  Emerson  v.  Senter, 
118  U.  S.  3,  8;  Fitzpa trick  v.  Flan- 
nagan,  106  U.  S.  648;  Butchart  v. 
Dresser,  4  DeGex,  M.  Sc  G.  543,  10 
Hare,  453:  In  re  Clough,  Bradford 
Commercial  Banking  Co.  v.  Cure, 
L.  R.  31  Ch.  Div.  326."  See,  also, 
Barton  v.  Lovejoy  (1894),  56  Minn, 
380,  57  N.  W.  Rep.  935,  46  Am.  St. 
Rep.  483. 

1  Although  there  lias  been  a  little 
doubt  about  the  power  of  the  sur- 
vivor to  make  an  assignment  for 
the  benefit  of  creditors,  the  weight 
of  avithority  undoubtedly  sustains 
it  (Fitzpatrick  v.  Flannagan  (1883), 
106  U.  S,  654,  27  L,  ed.  211;   Eraer- 

1^ 


son  V.  Senter  (1885),  118  U.  S.  3,  30 
L,  ed.  49;  Williams  v.  Whedon 
(1888),  109  N.  Y.  333,  16  N.  E.  Rep. 
365,  4  Am.  St.  Rep.  460;  Patton  v. 
Leftwich  (1889),  86  Va.  431,  10  S.  E. 
Rep.  686, 19  Am.  St.  Rep.  903,  6  L.  R. 
A.  569) ;  in  the  absence  of  a  statute 
forbidding,  Shattuck  v.  Chandler 
(1889),  40  Kan,  516,  20  Pac  Rep.  335. 
10  Am,  St,  Rep.  227. 

2  See  Little  v.  Caldwell  (1894),  101 
Cal,  553.  36  Pac,  Rep.  107,  40  Am. 
St.  Rep.  89;  Calvert  v.  Miller  (1886). 
94  N.  C.  600;  Oliver  v.  Forrester 
(1880),  96  111.  315, 

^Galbraith  v.  Tracy  (1894),  153 
111,  54,  38  N.  E.  Rep,  937,  46  Am.  St, 
Rep,  867,  28  L,  R.  A.  139;  Dayton 
V,  Bartlett  (1882),  38  Ohio  St.  357; 
Brooks  V.  Brooks  (1873),  13  Heisk, 
(Tenn.)  12, 

^Seeanfe,  gll9. 


EFFECT,  ETC.,  UPON    POWERS    OF   PARTNERS.  [§  270. 

they  may  be  held  accountable  for  interest  or  profits  and 
Avill  be  charged  personally  with  the  losses.^ 

The  deceased  partner  may,  however,  by  his  Avill  authorize 
the  business  to  be  carried  on  for  a  period  limited  therein, 
either  by  the  survivors  alone  or  by  the  survivors  and  bis 
executors  jointly,  and  the  business  may  be  continued  in  pur- 
suance of  such  a  provision.^  In  such  a  case,  unless  there  is 
something  in  the  will  to  indicate  a  contrary  purpose,  it  will 
be  presumed  that  the  deceased  intended  to  suljject  to  the 
hazard  of  the  business  onlv  the  capital  already  embarked  in 
it,  and  not  the  general  residue  of  his  estate.' 

Where  there  is  no  will,  the  persons  who  are  entitled  to 
receive  the  deceased  partner's  share  may  consent  to  a  con- 
tinuance of  the  business  on  such  terms  as  they  may  deem 
advisable.* 

§  270,  Same  subject  —  Liability  of  estate  of  deceased 
partner. —  Although,  as  has  been  seen,^  causes  of  action 
against  the  firm,  at  common  law,  survive  against  the  sur- 
viving partners  only,  the  estate  of  the  deceased  partner  is 
not  thereby  released  from  all  liability  in  ecpiity.  The  sur- 
viving partners  who  had  paid  the  debt  might  have  contribu- 
tion in  equity  from  the  estate  of  the  deceased  partner,  and, 
by  extending  this  equity  of  the  surviving  partners  to  the 
creditor  himself,  the  rule  is  now  established  in  England  and 
many  of  the  United  States  that  the  creditor  may  proceed 
either  as:ainst  the  survivors  at  law,  or,  without  having  any 
recourse  to  them  or  attempting  to  exhaust  the  partnership 
assets,  he  may  in  equity  proceed  at  once  against  the  estate 
of  the  deceased  partner.^     In  several  states  by  statute  this 

1  See  Story  on  Partnership,  i?  34:];  Walker  (1880),  10:5  U.  S.  444,  20  L. 
Robinson  v.   Simmons  (1888),   14G  ed.  404,  Paige's  Partn.  Cas.  201). 
Mass.  167,  15  N.  E.  Rep.  558,  4  Am.  ■•See  Robinson  wUhmnoiii^, a npra. 
St.  Rep.  299.  *See  cuite,  ^  208. 

2  See  Stewart  v.  Robinson  (1889),  ^See  Doggi-tt  v.  Dill  (1884),  108 
115  N.  Y.  328,  22  N.  E.  Rep.  100,  5  III.  500,  48  Am.  Rep.  505,  wliero 
L.  R.  A.  410.  many  cases  are  collected;  Nelson 

3  See  Smith  v.   Ayer  (1879),   101  v.  Ilill  (1847),  5  IIuw.  (U.  S.)  127. 
U.  S.  320,  25   L.  ed,  955;  Jones  v. 

173 


§  271.]  LAW    OF    PARTNERSHIP. 

method  of  procedure  is  expressly  authorized.^  Other  states, 
however,  such  as  New  York,  Georgia,  Wisconsin  and  per- 
haps some  others  have  declined  to  adopt  this  rule,  and  per- 
mit recourse  to  the  estate  of  the  deceased  only  when  the 
firm  and  the  survivors  are  insolvent.- 

§271.  Powers  of  partners  after  dissolution  —  Powers 
continue  for  the  purpose  of  closing  up  the  business. — 

The  dissolution  of  the  partnership  terminates  entirely  the 
power  of  each  partner  to  continue  to  bind  the  firm  by  new 
contracts.  The  power  of  each  partner  is  thenceforward 
limited  to  closing  up  the  partnership  affairs,  but  for  this  pur- 
pose his  authority  is  deemed  to  continue,  with  all  the  rights 
and  incidents  as  before.  Thus  either  partner  ma}^,  after  dis- 
solution, receive  payment  of  firm  debts  and  give  discharges 
therefor ;  sell  the  partnership  property ;  pay  the  firm  debts ;  or 
do  any  other  act  respecting  the  closing  up  of  previous  trans- 
actions which  he  might  do  if  the  partnership  still  continued.^ 

Unless  they  agree  otherwise,  each  of  the  former  partners 
has  an  equal  right  to  the  possession  of  the  assets,  and  is 
under  an  equal  duty  to  apply  them  to  the  discharge  of  part- 
nership obligations.* 

Where  there  are  more  than  two  partners,  the  majority 
have  the  same  power  to  control  the  winding  up  of  the  busi- 
ness that  the}^  have  to  direct  its  conduct  before  dissolution.'^ 

1  Thus,  see  Camp  v.  Grant  (1851),  111.  200;  Ruffner  v.  Hewitt  (1874), 
21  Conn.  41,  54  Am.  Dec.  321;  Man-  7  W.  Va.  585;  Seldner  v.  Mr.  Jack- 
ning  V.  Williams  (1851),  2  Mich.  105;  son  Nat.  Bank  (1887),  66  Md.  488,  59 
Ralston  v.  Moore  (1885),  105  Ind.  Am.  Rep,  190;  Perkins  v.  Butler 
243,  4  N.E.  Rep.  673;  Blair  v.  Wood  Co.  (1895),  44  Neb.  110,  63  N.  W. 
(1884),  108  Pa.  St.  278;  McLain  v.  Rep.  308;  Western  Stage  Co.  v. 
Carson  (1842),  4  Ark.  164,  37  Am.  Walker  (1856),  2  Iowa,  504,  65  Am. 
Dec.  777.  Dec.  789;   Davis  v.  Megroz  (1893), 

2  See  Rape  v.  Cole  (1873),  55  N.  Y.  55  N.  J.  L.  427. 

124,  14  Am.  Rep.  198;  Sherman  v.  *Gray  v.  Green  (1894),  142  N.  Y. 

Kreul  (1877),  42  Wis.  33;  PuUen  v.  316,  37  N.  E.  Rep.  124,  40  Am.  St. 

Whitfield  (1875),  55  Ga.  174;  Pear-  Rep.  596. 

son  V.  Keely  (1845),  6  B.  Mon.  (Ky.)  5  Western  Stage  Co.  v.  Walker. 

128,  43  Am.  Dec.  160.  supra. 

3  See  Heart  v.  Walsh  (1874),  75 

174 


EFFECT,  ETC.,  UPON    POWERS   OF    PARTNERS.       [^^  '27:2,  273. 

§272.  No  power  to  create  new  obligations. —  But 

Avith  the  closing  up  or  completion  of  old  transactions  the 
power  of  each  partner  after  dissolution  ends.  lie  cannot 
create  new  obligations,  or  vary  the  character,  form  or  obliga- 
tion of  those  already  existing.  Hence  he  cannot,  after  dis- 
solution, bind  his  partners  by  making,  accepting,  indorsing 
or  renewing  negotiable  paper;  create  a  new  or  revive  an 
old  debt  against  them;  remove  the  bar  of  the  statute  of  lim- 
itations as  to  them,  or  bind  them  by  admissions  or  declara- 
tions not  relating  to  prior  transactions;  provided,  of  course, 
in  all  cases,'  that  due  notice  of  the  dissolution  had  been 
given.^ 

§  273.  Powers  of  settling  or  liqnidating  partner. —  In- 
stead of  all  the  partners  participating  in  the  settlement  of 
the  partnership  affairs  after  dissolution,  as  contemplated  in 
the  last  section,  the  partners  may,  upon  such  dissolution, 
agree  that  one  of  the  partners  only  shall  proceed  to  liquidate 
the  affairs  of  the  firm.  An  express  agreement  to  this  effect 
is  not  indispensable ;  it  may  be  shown  by  acquiescence.  The 
effect  of  such  an  agreement  is  not  to  enlarge  the  powers  of 
the  settling  partner,  but  to  exclude  the  others  from  partici- 
pation. Such  an  agreement  could  not,  of  course,  affect  third 
persons  who  had  no  notice  of  it,  but  if  they  have  notice  they 
will  be  subject  to  the  equities  of  the  partners  if  they  do  not 
deal  only  with  the  partner  so  specified. 

1  See  Humphries  v.  Chastain  There  are  cases  holding  other- 
(1848),  5  Ga.  160,  48  Am.  Dec.  247;  wise  as  to  the  power  of  one  part- 
White  V.  Tudor  (18G0),  24  Tex.  039,  ner  to  prevent  tlie  operation  of  the 
70  Am.  Dec.  126;  Van  Keuren  v.  statute  of  limitations  by  admis- 
Parmelee  (1849),  2  N.  Y.  523,  51  sionsor  payments,  following  Whit- 
Am.  Dec.  822;  Tate  v.  Clements  comb  v.  Whiting,  2  Doug.  (Eng.) 
(1878),  16  Fla.  339,  26  Am.  Rep.  709;  652,  such  as  Beardsley  v.  Hall  (1800), 
Mayberry  v.  Willoughby  (1877),  5  36  Conn.  270,  4  Am.  Rep.  74;  Mcr- 
Neb.  368,  25  Am.  Rep.  491;  Pen-  ritt  v.  Day  (1875),  38  N.  J.  L,  33,  20 
noyer  v.  David  (1800),  8  Mich.  407;  Am.  Rei).  362,  but  the  weight  v! 
Clement  v.  Clement  (1887),  69  Wis.  authority  is  opposed  to  these  cases. 
599,  35  N.  W.  Rep.  17,  2  Am.  St. 
Rep.  760. 

176 


R  273.]  LAW    OF   PAETNEKSHIP. 

The  liquidating  partner  is  bound  to  be  diligent  and  must 
not  unreasonably  prolong  the  settlement.  If  he  does,  equity 
may  interfere.  His  duty  of  good  faith  and  fair  dealing  is 
perhaps  intensified  by  his  position  as  sole  administrator. 

He  has,  like  any  other  partner  after  dissolution,  power  to 
wind  up  and  complete  partnership  transactions  only,  and 
not  to  create  new  debts  or  obligations  against  his  former 
partners;  but  for  the  purposes  of  winding  up,  collecting 
debts,  discharging  obligations,  and  reducing  the  assets  to  an 
available  and  distributable  form,  all  the  powers  of  the  part- 
ners are  concentrated  in  him  and  may  be  exercised  accord- 
ingly.i 

iSee  Palmer  v.  Dodge  (1854),  4  Estate  of  Davis  (1840),  5  Wliart. 

Ohio  St.  21.62  Am.  Dec.  271;  Hil-  530,  34    Am.  Dec.  574;    Fulton  v. 

ton  V.  Vanderbilt  (1880),  82  N.  Y.  Central  Bank  (1879),  92  Pa.  St.  112; 

591;   Gilmore  v.  Ham  (1894),   142  Earon  v.  Mackey  (1884),  106  Pa.  St. 

N.  Y.  1,  36  N.  E.  Rep.  826,  40  Am.  452. 
St.  Rep.  554.    In  Pennsylvania,  see 

176 


>- 


CHAPTER  XYIL 

OF  SPECIAL  AGREEMENTS  BETWEEN  THE  PARTNERS  AT  DIS- 
SOLUTION. 


§  274.  Agreements  as  to  distribu- 
tion of  property  or  pay- 
ment of  debts. 


§  275.  Agreements  creating  re- 
lation   of    principal    and 
surety. 
276.  Creditor's  assent  to  ar- 
rangement. 


§  274.  Agreements  as  to  distribution  of  property  or  pay- 
ment of  debts. —  It  is  not  uncommon  for  the  partners  to 
agree  at  dissolution  as  to  the  distribution  of  the  partnership 
property  or  the  payment  of  the  partnership  del)ts.  Thus,  an 
agreement  that  the  continuing  partner  shall  assume  and  pay 
the  partnership  debts  is  often  made,  and,  even  though  not 
expressly  made,  would  be  implied  to  the  extent  of  the  firm 
assets  received  by  the  continuing  partners.^  It  is  not  an 
agreement  to  answer  for  the  debt  of  another,  and  is  there- 
fore valid  though  not  in  writing.^ 

Such  agreements  are  entirely  valid  as  between  the  part- 
ners themselves,  but  they  do  not  bind  the  firm  creditors 
unless  the  latter  become  a  party  to  them.     The  liability  of 
each  partner  for  the  payment  of  the  partnersliip  debts  con 
tinues  iri  solido  after  dissolution  as  before;  and  creditors 
cannot  be  cut  off  from  their  remedies  by  any  agreement  be- 
;:     tween  the  partners  alone.     Tliey  neither  lose  their  right  to 
>fe   proceed  against  the  partner  in  whose  favor  the  arrangement 
^     is  made,  nor  are  they  required  to  first  exhaust  their  remedies 
against  the  other. 

»See  Hobbs  v.  Wilson  (1865),  1  -'See  Hunt  v.  Rogers  (1803).  7 
W.  Va.  50;  Peyton  v.  Lewis  (1«51),  Allen  (Mas.s.),  '10!);  Vanness  v  Du- 
12  R  Mon.  (Ky.)  ;J5G.  bois  (1878),  01  lud.  ;JIW. 

13  177 


§^  275,  27G.]  LAW  OF  partnership. 

g  275.  Creating  relation  of  principal  and  surety. 

Such  an  agreement,  however,  creates  the  relation  of  prin- 
cipal and  surety  between  the  partners  —  the  partner  assum- 
ing the  debts  being  the  principal  and  the  other  the  surety, — 
and  creditors  who  have  notice  of  this  arrangement  must 
respect  the  rights  of  the  surety  as  in  other  cases.  Thus,  an 
extension  of  time  to  the  partner  who  has  thus  become  the 
principal  debtor  will  release  the  other;  and  if  the  latter  pays 
the  debt  he  is  entitled  to  the  benefit  of  the  securities  which 
the  creditor  held  against  the  principal  debtor.^ 

g  276.  Creditor's  assent  to  arrangement. —  An  as- 
sent by  the  creditor  to  the  assumption  by  one  partner  of 
the  firm's  debt  to  such  creditor,  and  an  agreement  to  look 
to  him  alone  therefor,  if  upon  a  sufficient  consideration,  will 
amount  to  a  novation  and  discharge  the  retiring  partner; 
but  such  assent  must  be  actual,  and  will  not  ordinarily  be  im- 
plied from  mere  silence.^  And  unless  there  is  a  sufficient 
consideration,  the  agreement  of  the  creditor  to  release  the 
retiring  partner  and  look  only  to  the  others  will  not  be 
bindinof.^ 

iSee  Smith  v.  Sheldon  (1876),  35  (1891),  47  Minn.  151,  49  N.  W.  Rep. 
Mich.  42,  34  Am.  Rep.  529;  John-  660,  28  Am.  St.  Rep.  336. 
son  V.  Young  (1882),  20  W.  Va.  614;  2  See  Bank  v.  Green  (1884),  40 
Fernald  v.  Clark  (1892),  84  Me.  234,  Ohio  St.  431;  York  v.  Orton  (1885), 
24  Atl.  Rep.  823;  Brill  v.  Hoile  65  Wis.  6,  Paige's  Partn.  Cas.  160; 
(1881),  53  Wis.  537,  11  N.  W.  Rep.  Barnes  v.  Boyers  (1890),  34  W.  Va. 
42;  Bank  v.  Green  (1884),  40  Ohio  303,  12  S.  E.  Rep.  708. 
St.  431;  Leithauser  v.  Baumeister        *  Eagle    Mfg.    Co.    v.    Jennings 

(1883),  29  Kan.  657,  44  Am.  Rep.  668, 
178 


CHAPTER  XYIIL 


OF  THE  LIEN  OF  PARTNERS. 


§  277.  In  general. 

278.  Nature  of  the  right. 

279.  When  it  becomes  impox'tant. 

280.  To  what  lien  attaches. 


§  281.  Against  whom  lien  exists. 

282.  Wliat  the  lien  secures. 

283.  How  lien  is  lost. 

284.  No  lien  if  partnership  illegal. 


§  277.  Ill  general. —  Something  has  been  already  said  re- 
garding the  right  of  each  partner  to  insist  that  the  partner- 
ship assets  shall  be  applied  to  the  payment  of  the  partner- 
ship debts;  and  it  has  been  noticed  that  the  right  is  often 
spoken  of  as  the  partner's  lien.^  Before  taking  up  the  sub- 
ject of  the  application  of  the  assets  s^jQ.d  the  final  accounting, 
a  little  further  consideration  of  this  subject  seems  desirable. 
In  dealing  with  this  matter,  the  language  of  Mr.  Justice 
Lindley  will  be  largely  adopted.^ 

§  278.  Nature  of  the  right. —  In  order  to  discharge  him- 
self from  his  liabilities  as  a  partner,  every  partner  has  a  right 
to  have  the  property  of  the  partnership  applied  in  payment 
of  the  partnership  debts.  In  order,  also,  to  .secure  a  proper 
division  of  the  surplus  assets,  he  has  a  right  to  have  what- 
ever may  be  due  to  the  lirm  from  his  copartners,  as  members 
thereof,  deducted  from  what  otherwise  would  bo  payable  to 
them  in  respect  of  their  shares  in  the  partnership.  In  other 
words,  each  partner  may  be  said  to  have  an  equitable  lien 
on  the  partnership  property  for  the  pur|)o.se  of  having  it  ap- 
plied in  payment  of  the  partnership  debts;  and  also  a  simi- 
lar lien  upon  the  surplus  assets  for  ti)e  purj)ose  of  llavill^■ 
them  applied  in  payment  of  what  may  be  (hie  to  tlir  p.irt 


1  See  ante,  §  122. 


-See  1   Liiiillcy   on    I'artiicrsliip 
(Ewell's  2d  ed.),  ;ir)2  et  seq. 


179 


§§  279,  280.]  LAW    OF   PARTNEESHIP. 

ners  respectively,  after  deducting  what  may  be  due  from 
them  as  partners,  to  the  firm.^ 

§  279.  Same  subject  —  When  it  I)ecomes  important. — 

This  right  or  lien  does  not  exist  for  any  practical  purpose 
until  the  affairs  of  the  partnership  have  to  be  wound  up,  or 
the  share  of  a  partner  has  to  be  ascertained ;  nor  has  any 
partner  thereby,  as  has  been  seen,-  a  right  to  insist  that  firm 
creditors  shall  exhaust  the  firm  assets  before  having  recourse 
to  the  partners  as  individuals.  But  when  partnership  ac- 
counts have  to  be  taken,  and  the  shares  of  the  partners  have 
to  be  ascertained,  the  lien  of  the  partners  on  the  firm  assets 
and  on  each  other's  shares  becomes  of  the  greatest  impor- 
tance. 

§  280.  To  what  the  lien  attaches. —  During  the  continu- 
ance of  the  partnership  the  lien  attaches  to  everything  which 
can  be  considered  partnership  property.  It  is  not  lost  by 
substitution  of  new  stock  for  old,  and  on  the  death  or  bank- 
ruptcy of  a  partner  his  lien  continues  in  favor  of  those  who 
represent  him  until  his  share  has  been  ascertained  and  pro- 
vided for  by  the  other  partners.  After  the  partnership  has 
been  dissolved,  however,  the  lien  is  confined  to  what  was 
partnership  property  at  the  time  of  the  dissolution,  and  does 
not  extend  to  what  may  have  been  subsequently  acquired 
by  those  who  continue  to  carry  on  the  business. 

As  the  lien  extends  only  to  that  which  is  firm  property,  if 
the  partnership  be  one  in  the  profits  only,  the  lien  can  attach 
to  the  profits  alone  and  not  to  the-  means  by  which  those 
profits  were  produced.'  And  as  it  is  an  incident  of  partner- 
ship, it  does  not  exist  where  there  is  realh^  no  partnership 
but  only  a  joint  adventure,  in  respect  of  which  each  retains 
the  title  to  his  own  goods  and  their  proceeds.* 

1  See  1  Lindley,  supra;  Pearson        2  g^e  ante,  §  215. 
V.  Keedy  (1845),  6  B.  Men.  (Ky.)  128,        s  See  ante,  §  52. 
43  Am.  Dec.  160;  Bard  well  v.  Perry        ^  1  Lindley,  353  (E  well's  2d  ed.). 
(1847),  19  Vt.  292,  47  Am.  Dec.  687. 

180 


LIEN    OF    TARTXERS.  [§§  281-2S3. 

§  281.  Acrainst  whom  lien  exists —  The  lien  of  each  part- 
ner exists  not  onh-  as  against  the  other  partners,  but  also 
against  all  persons  claiming  through  them  or  any  of  them.^ 
It  is  available,  therefore,  against  their  executors,  execution 
creditors  and  assignees  or  trustees  in  bankruptcy.-  While, 
however,  it  exists  against  the  share  of  each  partner  and 
against  a  person  who  purchases  that  share  from  him,  it 
would  defeat  the  purposes  of  the  partnership  to  enforce  it 
against  the  purchaser  of  Urm  property  in  the  ordinary  course 
of  business;  and  a  person,  therefore,  who  in  good  faith  pur- 
chases from  one  partner  specific  chattels  belonging  to  the 
firm,  acquires  a  good  title  thereto  notwithstanding  the  liens 
which  the  other  partners  might  have  had  prior  to  the  sale.'' 

§  282.  What  the  lien  secnres.—  The  lien  of  the  partners 
is  intended  to  secure  whatever  is  due  to  or  from  the  firm  by 
or  to  the  members  thereof  as  such.  It  does  not,  therefore, 
extend  to  debts  incurred  between  the  firm  and  its  members 
otherwise  than  in  their  capacity  as  partners,  and  in  case  of 
the  bankruptcy  of  a  partner  his  assignees  may  claim  his  share 
without  regard  to  such  a  debt;  as,  for  example,  a  debt  for 
money  borrowed  by  one  partner  from  the  firm  for  a  purely 
private  purpose  of  his  own.^ 

§  283.  How  lien  is  lost — The  partner's  lien  on  partner- 
ship property  is  lost  by  the  conversion  of  such  ])i-o])orty  into 
the  separate  property  of  another  partner,  or  into  the  prop- 
erty of  a  stranger  with  the  other  partner's  consent.  If, 
therefore,  on  dissolution  the  property  of  the  (ii-ni  is  divided 
between  the  partners  upon  the  understanding  that  the  debts 
shall  be  paid  in  some  specified  way,  tlie  lien  is  gone  ;ind  the 
partners  cannot  reclaim  the  ))roperty,  although  the  debts 
remain   unpaid.'     8o  wliore  one  pai-tnei'  sells  out  nil  c.f  his 

1  1  Liridloy,  Sr>i  (Ewell's  2d  ed.).  a.See  1  Lindley,  ulii  miprn. 

2.SeeKirbyv.8flioonmaker (18-18),  ^See  I  Liiiflh'y.IMt (Kwcll'sidcd.). 
3  Barb.  Ch.  (N.  Y.)  4(5,  4*J  Am.  l)o(!.  \St'u  1  Lindk'y.:tr).-)(Kw('ll's2d»'(l.); 
160.  Miller  V.  Kslill  (I.s:,(5).  Tt  Ohio  St.  508, 

181 


§  284.]  LAW    OF    PAKTNEKSHIP. 

interest  m  the  firm  to  his  copartner,  and  the  latter  agrees  to  ^\ 

pay  the  debts  of  the  partnership,  the  lien  of  the  selling  part- 
ner is  gone,  and,  as  an  incident,  as  will  be  seen,^  the  rights 
of  the  firm  creditors  to  priority  of  payment  out  of  the  assets, 
which  is  a  right  worked  out  through  the  right  of  the  part- 
ner,2  is,  in  many  cases,  held  to  be  gone  also.* 

§  284.  No  lien  if  partnership  illegal.—  If  the  partnership 
is  illegal,  its  members  have  no  lien  upon  their  common  prop- 
erty or  upon  each  other's  shares  therein,  unless  it  be  by  virtue 
of  some  agreement  not  affected  by  the  illegality.* 

67  Am.  Dec.  305;  Smith  v.  Edwards        » See  Miller  v.  Estill,  siqyra;  Ladd 

(1846),  7  Humph.  (Tenn.)  106, 46  Am.  v.  Griswold  (1847),  4  Gilm.  (111.)  25, 

Dec.  71.  46   Am.    Dec.  443.     But  see   more 

1  See  post,  §  298.  fully,  post,  §  298. 

2  See  ante,  §  124  *  1  Lindley,  355  (Ewell's  2d  ed.). 

182 


CHAPTER  XIX. 


OF  THE  APPLICATION  OF  THE  PARTNERSHIP  ASSETS. 


f?  285.  In  general. 

286.  What  principles  govern. 

287.  Application      by     partners 

themselves  while  partner- 
ship continues. 

288.  Right  of  firm  to  assume 

individual  debts  of  part- 
ner. 

289.  Application  by  court — Firm 

creditors  have  priority. 

290.  Joint  but  not  firm  cred- 
itors postponed. 

291.  Partner    cannot    com- 
pete with  firm  creditors. 

292.  Individual  creditors 

postponed     to     partners' 
claims. 


§  293.  Individual  creditors  usually 
have  priority  in  individ- 
ual assets. 

294.  The  contrarj'  view. 

295.  Rules  apply  only  where 

there  are  two  funds. 

296.  Firm   cannot  compete 

with  separate  creditors. 

297. Right    of    partner    to 

apply  individual  assets  to 
firm  debts. 

298.  Right  of  jiartners  to  convert 

firm    projjerty   into    indi- 
vidual pro|)erty. 

299.  Application  wliere  there  was 

no  ostensible  partnership. 

300.  Equitable   rules  do  not  de- 

feat legal  priorities. 


§  285.  Ill  general. —  The  question  of  the  pi-oper  iii)[)lica- 
tion  and  distribution  of  the  partnership  assets  has  given  rise 
to  no  little  difficulty  and  conflict  of  decision.  The  chief 
sources  of  difficulty  have  been  disputes  between  the  credit- 
ors of  the  partnership  and  the  creditors  of  the  iiulivi(hial 
partners.  May  the  creditors  of  the  individual  ])artiiers  ob- 
tain, in  any  way,  the  application  of  partnership  fuiid.s  ti» 
their  claims?  IMay  partnership  creditors,  whose  claims  arc 
not  satisfied  out  of  the  partnership  i)rop(!rly,  havr  I'ccourse 
to  the  individuui  [)i(>perty  of  the  ])artnei-,  and  in  such  case 
may  they  sinii-e  e(pudly  with  individual  creditors  or  mn.si 
they  be  jjostponed  until  iiidi\'idu;il  ci'editors  ;ire  p.-iid?  TIkh' 
and  similar  (piesticjns  indicatci  tin;  difficulties  w  liieli  a^i^e. 

183 


§§  2SG,  2 ST.]  LAW    OF    PARTNERSHIP. 

§  286.  What  principles  control. —  At  the  foundation  of 
the  matter  lies  the  rule,  already  noticed,'  which  must  con- 
stantly be  kept  in  mind.  The  capital  or  property  of  the 
firm  has  been  contributed  for  partnership  purposes,  and  it 
is  part  of  the  implied,  if  not  the  express,  understanding  be- 
tween the  partners,  that  the  partnership  property  shall  be 
used  only  for  partnership  purposes,  e.  g.,  to  pay  partnership 
debts.  Each  partner  has  therefore  the  right  to  insist  that 
the  partnership  property  shall  be  so  applied.  This  right  is 
the  right  of  the  partners  as  between  themselves;  but  it  has 
sometimes  been  regarded,  not  as  the  right  of  the  partners, 
but  as  the  right  of  the  partnership  creditors,  and  many  cases 
have  been  decided  upon  this  erroneous  assumption.  If  it  is 
a  right  of  the  partners,  it  is  one  which  they  may  waive  if 
they  see  fit  to  do  so ;  but  if  it  is  a  right  of  the  creditors,  then 
it  is  not  one  which  the  partners  can  waive. 

The  question  may  present  a  different  aspect  if  it  arises 
"while  the  partnership  is  still  going  on  than  it  will  if  it  arises 
after  the  partnership  has  been  dissolved  and  the  affairs  are 
being  wound  up  under  judicial  direction,  and  we  will  there- 
fore separately  consider  each  phase. 

§  287.  Application  of  the  assets  of  a  going  partnership 
by  the  partners  themselves. —  While  the  affairs  of  the  part- 
nership are  still  going  on  and  its  property  and  business  are 
still  in  the  hands  of  the  partners  themselves,  it  is,  in  general, 
true  that  they  may  make  such  disposition  of  the  property  as 
they  see  lit.  It  has  sometimes  been  said  that  the  partnership 
creditors  have  a  kind  of  lien  upon  the  partnership  assets,  but 
this  is  not  true.  It  is  the  property  of  the  partners,  which 
they  ma}^,  in  general,  deal  with  as  they  please.^     Thus  they 

1  See  ante,  §§  123-124.  with  their  property  as  they  see  fit. 

2  Thus  in  Reyburn  v.  Mitchell  The  firm  creditors  have  no  lien  on 
(1891),  106  Mo.  365,  16  S.  W.  Rep.  the  partnership  property  for  the 
592,  27  Am.  St.  Rep.  350,  the  court,  payment  of  their  debts  while  the 
quoting  from  Sexton  v.  Anderson,  firm  continues  to  exist.  Partners 
95  Mo.  381,  say:  "The  partners  have  a  right  to  have  the  i^artner- 
may,  so  long  as  the  firm  exists,  do  ship  property  applied  to  partner- 

184 


APPLICATIOX    OF   PAKTNEKSHIP   ASSETS. 


[§  288. 


mav  sell  it,  mortgage  it,  or  turn  it  out  in  payment  of  their 
partnership  debts.  They  may  sell  it  all  in  good  faith,  and  the 
purchaser  will  get  a  good  title,  even  though  the  firm  was  in- 
solvent. They  may  also,  it  is  held,  transfer  the  tirm  pro[)ert3' 
to  pay  their  joint  debt,  though  it  be  not  a  ])artnership  debt, 
and  the  joint  creditor  will  thereby  obtain  a  good  title  to  the 
firm  propert}^^ 

§288.  Same  subject  —  Kiglit  of  firm  to  assume  or  pay 
individual  debts  of  the  partners. —  Whether,  however,  the 
partners  may  apply  the  partnershi])  property  in  payment  of 
the  individual  debt  of  one  of  the  partners  has  been  much 
disputed.  It  is  conceded  that  the}'  may  do  this  if  they  re- 
serve enough  to  satisfy  the  partnership  creditors;-  but  where 
the  partnership  is  already  insolvent,  or  where  sucb  an  ap- 
plication will  leave  it  insolvent  and  unable  to  pay  the  part- 
nership debts,  there  is  controversy. 

It  is  held,  on  the  one  hand,  that  if  the  firm  is  then  in- 
solvent, or  if  such  an  application  of  their  assets  will  make 
them  insolvent,  it  would  be  fraud  upon  the  partnership  cred- 

sliip  purposes,  but  tliis  is  a  ri^ht  or  erty.  Instead  of  selling  for  casli, 
lien  which  they  may  waive.  Hence  they  may  transfer  Rvm  i)roperty 
the  great  majority  of  adjudicated  to  pay  a  firm  debt.  And  they  may 
cases  are  to  this  effect:  that  all  the  transfer  the  firm  property  to  pay 
partners  may,  by  their  joint  act,  a  joint  debt  for  which  they  are 
dispose  of  partnership  property  in    jointly  liable  outside  of  the  busi- 

ness  of  the  firm,  and  the  joint 
creditor  will  obtain  a  gooil  title  to 
the  firm  property."  To  same  elTect: 
Citizens'  Bank  v.  Williams  (IMDl), 
128  N.  Y.  77,  28  N.  E.  Rep.  ;i:3,  20 
Am.  St.  Rep.  4.")1. 

aSee  Schmidlapp  v.  Currie  (1H7M), 
55  Miss.  597,  30  Am.  Rei).5:U);  Ilaf-o 
V.  Campbell  (1891).  78  Wis.  573,  47 
N.  W.  Rep.  179.  2:5  Am.  St.  R.'|». 
422;  Woodniansic  v.  lloiconili 
(1885).  U  KiHi.  :i5,  7  Pac.  Rfp.  (Hi;!; 
Jewctt  V.  iMeech  (1884),  lUi  liul. 
289. 


liquidation  and  payment  of  a  debt 
owing  by  an  individual  member  of 
the  firm.  The  qualification  is  that 
the  transaction  must  be  in  good 
faith,  and  not  for  fraudulent  pur- 
poses." 

1  Thus  in  Saunders  v.  Reilly 
(1887),  105  N.  Y.  12.  12  N.  E.  Rep. 
170,  59  Am.  Rep.  472,  the  court 
say:  "All  members  of  a  firm  may 
sell  the  partnership  property,  even 
if  wholly  insolvent,  to  a  purchaser 
in  good  faith,  and  thus  convey, 
free  from  the  claim  of  (Inn  (;redit- 
ors,  a  good  title  to  tlie  firm  prop- 


185 


288.] 


LAW    OF   PARTNEKSHIP 


itors  to  permit  such,  an  application,  and  it  will  therefore  not 
be  allowed.^ 

It  is  contended,  on  the  other  hand,  that  if  done  while  the 
partners  are  still  in  control  of  their  business,  they  may  make 
such  an  application,  if  they  act  in  good  faith,  though  they 
w^ere  already  or  thereby  became  insolvent.- 

The  W'Cight  of  modern  authority  seems  to  support  the 
latter  view. 


1  See  Ransom  v.  Vandeventer 
(1863),  41  Barb.  (N.  Y.)  307;  Wilson 
V.  Robertson  (1860),  21  N.  Y.  587; 
Hage  V.  Campbell,  supra;  Menagh 
V.  Whitvvell  (1873),  52  N.  Y.  146,  11 
Am.  Rep.  683,  Ames'  Cases  on 
Partn.  229;  Kurner  v.  O'Neil  (1894), 
39  W.  Va.  515,  20  S.  E.  Rep.  589; 
Hill  V.  Draper  (1894),  58  Ark.  625, 
24  S.  W.  Rep.  1075. 

In  Arnold  v.  Hagerman  (1888),  45 
N.  J.  Eq.  186,  17  Atl.  Rep.  93,  1  Am. 
St.  Rep.  712,  the  court,  adoi^ting 
the  language  of  Clements  v.  Jes- 
sup,  36  N.  J.  Eq.  569,  saj^s:  "Part- 
nei'ship  creditors,  in  equity,  have 
an  inherent  priority  of  claim  upon 
partnership  property  over  individ- 
ual creditors;  and  a  transfer  of 
partnership  property  by  one  part- 
ner, with  the  consent  of  tlie  other 
partners,  or  by  all  the  partners,  to 
pay  individual  debts,  is  fraudulent 
and  void  as  to  firm  creditors,  unless 
the  firm  was  then  solvent  and  had 
sufficient  property  remaining  to 
pay  the  partnership  debts." 

The  indorsement  of  a  note  in 
the  firm  name  to  secure  the  liabil- 
ity of  one  of  the  partners  when  the 
firm  is  insolvent  is  not  fraudulent 
as  against  firm  creditors,  provided 
it  is  done  for  an  honest  purpose, 
with  the  consent  of  the  members 
of  the  firm,  and  the  indorsee  did 


not  know  that  the  firm  was  in- 
solvent. Bernheimer  v,  Rindskopf 
(1889),  116  N.  Y.  428,  22  N.  E.  R-ep. 
1074,  15  Am.  St.  Rep.  414. 

2  In  Goddard-Peck  Grocery  Co. 
V.  McCune  (1894),  122  Mo.  426,  25 
S.  W.  Rep.  904,  29  L.  R.  A.  681,  the 
court  say:  '•  No  principle  of  law  is 
better  settled  than  that,  in  the  ad- 
ministration of  an  insolvent  part- 
nership estate,  the  assets  of  the 
firm  mvist  be  applied  to  the  satis- 
faction of  the  firm  creditors  to  the 
exclusion  of  the  creditors  of  the 
individual  partners.  Hundley  v. 
Farris,  103  Mo.  78,  12  L.  R.  A.  254; 
First  Nat.  Bank  v.  Brenneisen,  97 
Mo.  148,  and  cases  cited  in  each. 
The  principle  we  think  equally 
well  settled  by  the  more  recent  de- 
cisions of  this  court,  as  well  as  by 
the  weight  of  judicial  authority  in 
other  jurisdictions,  that  the  assets 
of  an  insolvent  firm,  before  disso- 
lution, may,  with  the  consent  of  all 
the  partners,  be  applied  to  the  sat- 
isfaction of  all  the  individual  debts 
of  the  members  of  the  firm,  when 
done  in  good  faith.  Sexton  v.  An- 
derson, 95  Mo.  380;  Reybuvn  v. 
Mitchell,  106  Mo.  365  (stipra),  and 
cases  cited  in  each;  Seger's  Sons 
V.  Thomas  Bros.,  107  Mo.  635.  As 
Phelps  V.  McNeely,  66  Mo.  555.  27 
Am.  Rep,  378,  is  in  conflict  with 


186 


APrLICATION    OF    PARTNERSHIP    ASSETS. 


[§  280. 


§  280.  Application  of  assets  when  distributed  by  court — 
Firm  creditors  first  paid  out  of  firm  assets. —  AVheii,  how- 
ever, the  management  of  the  partnership  assets  is  taken  out 
of  the  hands  of  the  partners  —  who  have  made  no  previous 
disposition  of  them  ^  —  and  put  under  the  control  of  the 


the  cases  last  cited  and  the  great 
weight  of  authority,  it  should  not 
be  followed  and  is  overruled." 

In  Fisher  v.  Syfers(1887).  109  Ind. 
514,  10  X.  E.  Rep.  306,  it  is  said: 
••  The  rule  that  obtains  in  the  dis- 
tribution of  the  estate  of  partners, 
and  under  which  partnership  cred- 
itors are  entitled  to  priority  of 
payment  out  of  the  partneiship 
assets,  is  an  equitable  doctrine  for 
the  benefit  and  protection  of  the 
partners  respectively.  Partnership 
creditors  have  no  lien  upon  part- 
nership property;  their  right  to 
priority  of  payment  out  of  the  firm 
assets,  over  the  individual  cred- 
itors, is  always  worked  out  through 
the  liens  of  the  partners.  Warren 
V.  Farmer,  100  Ind.  593;  Trentman 
V.  Swartzell,  85  Ind.  443.  Upon 
the  death  of  one  partner,  or  where 
the  firm  becomes  bankrupt,  or 
where  the  partnership  assets  are 
being  administered  by  a  court,  the 
rule  of  equitable  distribution  is 
apjilicable  to  its  fullest  extent. 
Where,  however,  the  partners  have 
tlie  possession  and  control  of  their 
own  property,  they  have  the  right 
to  make  any  honest  disposition  of 
it  they  see  fit;  each  has  the  right 
to  waive  his  e(|uitable  lien,  and  to- 
gether they  may  sell,  assign  or 
mortgage  the  property  of  the  firm 
to  i)ay  or  secure  either  an  individ- 
ual debt  of  one  of  the  partners,  ur 
the  debts  of  the  firm." 
To  same  effect:  Purple  v.  Far- 


rington  (1889),  119  Ind.  164.25  N.  E. 
Rep.  904,  4  L.  R.  A.  535;  Winslow 
V.  Wallace  (1888),  116  Ind.  317,  17 
N.  E.  Rep.  923,  1  L.  R.  A.  179;  Elli- 
son V.  Lucas  (1891),  87  Ga.  223,  13 
S.  E.  Rep.  445,  27  Am.  St.  Rep.  242; 
Smith  V.  Smith  (1893),  87  Iowa,  93, 
54  N.  W.  Rep.  73,  43  Am.  St.  Rep. 
359;  Teague  v.  Lindsey  (1895),  — 
Ala.  — ,  17  So.  Rep.  538;  Huiskamp 
V.  Moline  Wagon  Co.  (1886),  121 
U.  S.  310.  30  L.  ed.  971,  7  Sup.  Ct. 
Rep.  899;  Case  v.  Beauregard  (1878), 
99  U.  S.  119;  Pepper  V.  Peck  (1890), 
17  R.  I.  55,  20  Atl.  Rep.  16;  Wood- 
mansie  v.  Holcomb  (1885),  34  Kan. 
35,  7  Pac.  Rep.  003;  Myers  v.  Tyson 
(1896),  —  Kan.  — ,  43  Pac.  Rep.  91; 
Farwell  v.  Huston  (1894),  151  111. 
239,  37  N.  E.  Rep.  804,  42  Am.  St. 
Rep.  237. 

1  Thus,  in  Case  v.  Beauregard 
(1878),  99  U.  S.  119,  it  is  said:  "The 
right  of  each  partner  extends  only 
to  the  share  of  wliat  may  remain 
after  payment  of  the  debts  of  the 
firm  and  a  settlement  of  its  ac- 
counts. Growing  out  of  the  right, 
or  rather  included  in  it,  is  the 
right  to  have  the  partnership  prop- 
erty applied  to  the  paj'ment  of  the 
partnership  debts  in  i)reference  to 
those  of  any  individual  partner. 
This  is  an  equity  tliat  partners 
have  between  themselves,  and  in 
certain  circnnistances  it  inures  to 
the  benefit  of  the  creditors  of  the 
firm.  The  latter  are  said  to  liavo 
the  privilege  or  preference,  some- 


187 


§  289.]  LAW   OF    PAETXERSHIP. 

court  as  in  case  of  dissolution,  bankruptcy  proceedings  and 
the  settlement  of  insolvent  estates  in  courts  of  equity,  a  dif- 
ferent rule  prevails.  Acting  here  upon  the  presumed  inten- 
tion and  desire  of  each  partner  that  the  partnership  assets 
shall  be  applied  to  the  discharge  of  the  partnership  liabil- 
ities, the  courts  apply  them  first  to  that  purpose,  and  exclude 
the  individual  creditors  of  the  partners  from  participation 
until  the  firm  creditors  are  paid. 

So  where  firm  property  has  been  levied  upon  for  the  indi- 
vidual debt  of  one  partner,  inasmuch  as  the  only  interest 
which  can  be  so  sold  is  the  partner's  share  in  the  final  sur- 
plus,^ such  levy  must  yield  priority  to  subsequent  levies  for 
debts  due  to  the  firm  creditors.'^  And  the  same  result  will 
ensue  where  one  partner  has  mortgaged  or  otherwise  incum- 
bered his  separate  interest  to  secure  his  separate  creditors.^ 

But  where  all  of  the  partners  themselves,  while  the  assets 
remained  under  their  control,  have  created  valid  liens  upon 
the  property,  the  court  in  administering  the  estate  will  give 
such  liens  effect.* 

timesloosely  denominated  a 'lien,'  itors  of  the   firm  to  avail  tliem- 

to  have  the  debts  due  to  them  paid  selves  of  his  equity  and  enforce 

out  of  the  assets  of  a  firm  in  course  through  it  the  application  of  those 

of  liquidation  to  the  exclusion  of  assets  primarily  to  the  payment  of 

the  creditors  of  its  several  mem-  the  debts  due  them  whenever  the 

bers.     This  equity  is  a  derivative  property  comes  under  its  adminis- 

one.    It  is  not  held  or  enforceable  tration." 

in  their  own   right.     It  is  practi-  i  See  ante,  %  100. 

cally  a  subrogation  to  the  equity  of  2  Jarvis  v.  Brooks  (1853),  27  N.  H. 

the  individual  partner,  to  be  made  37,   59  Am.   Dec.   359;    Conroy  v. 

effective  only  through  him.  Hence,  Woods  (1859),  13  Cal.  626,  73  Am. 

if  he  is  not  in  a  condition  to  en-  Dec.    605;     Bullock    v.    Hubbard 

force  it.  the  creditors  of  the  firm  (1863),  23  Cal.  495,  83  Am.  Dec,  180; 

cannot  be.      Rice   v.  Barnard,  20  Pierce  v.  Jackson   (1810),  6  Mass. 

Vt.   479,   50  Am.    Dec.   54;    York  242,  Ames'  Partn.  Cas.  293. 

County  Bank's  Appeal,  32  Pa.  St.  sgwart  v.  Mercantile  Co.  (1895), 

446.     But  so  long  as  the  equity  of  —  Mo.  — ,  31  S.  W.  Rep.  1041. 

the  partner  remains  in  him  — so  *  Smith  v.  Smith  (1893),  87  Iowa, 

long  as  he  retains  an  intei'est  in  93,  54  N.  W.  Rep.  73,  43  Am.  St. 

the  firm  assets  as  a  partner  —  a  Rep.  359. 
court  of  equity  will  allow  the  cred- 

188 


APPLICATION    OF   PARTNERSHIP   ASSETS.       [§§  29(^-292. 

§  290.  Same  subject  —  Joint  but  uot  partnership  cred- 
itors not  preferred.—  The  reasons  which  operate  to  give 
firm  creditors  as  such  a  preference  in  payment  out  of  firm 
assets  operate  to  exclude  from  such  priority  any  who  do 
not  stand  in  that  relation.  It  is  consequently  held  that  the 
joint  creditors  of  the  partners  as  individuals,  not  being  part- 
nership creditors,  must  be  excluded  from  ])articipation  in 
the  partnership  assets  until  the  firm  creditors  are  paid.' 

§  291.  Same  subject  —  Partner  cannot  compete  with 
firm  creditors. —  So,  if  the  firm  be  indebted  to  one  partner, 
inasmuch  as  he  is  himself,  as  a  member  of  the  firm,  one  of 
the  persons  from  whom  his  claim  is  due,  and  is  therefore  at 
once  both  debtor  and  creditor,  while  as  to  the  cUiims  of 
strangers  against  the  firm  he  is  a  debtor  simply,  it  is  clear 
that  he  is  not  strictly  a  firm  creditor  within  the  rule  which 
gives  such  creditors  priority.  It  is  settled,  therefore,  that 
he  cannot  compete  with  the  latter  class  in  securing  payment 
out  of  the  assets  of  the  firm ;  neither  can  his  own  creditors, 
b\^  virtue  of  his  claim,  be  permitted  to  so  compete.- 

An  exception  to  this  rule  has  been  made  where  the  firm 
and  the  partner  were  carrying  on  separate  trades,  and  the 
claim  was  due  in  respect  of  goods  furnished  by  one  to  the 
other  as  such  separate  traders.^ 

§  292.  Same  subject  —  One  partner's  share  cannot  be 
readied  by  liis  creditors  till  partners'  claims  against  lirm 
are  satisfied.—  So,  though  the  share  or  interest  of  one  part- 
ner in  the  final  surplus  may,  as  has  been  seen,  be  rendered 
available  to  his  creditors,  it  must  be  kc})t  in  mind  that  that 
surplus  is  not  ascertained  until  not  only  the  firm  creditors 
as  such  are  paid,  but  also  not  until  the  claims  of  the  re- 

1  See  Forsyth  V.  Woods  (lyrO),  U  Atl.  Rep.  Ii52;  Ex  parte  Hlyllie 
Wall.  (U.  S.)  484;  Serond  Nat.  Bank     (lb81),  10  Cii.  Div.  020. 

V.  Burt  (1883;,  93  N.  Y.  233;  Turner  3  See  Ex  parte  Sillitoo  (1824),  1 

V.  Jaycox  (1809),  40  N.  Y.  470.  Glyn  &  Jameson,  374,  Ames'  Cas. 

2  See  Edison  Illuminating  Co.  v.  on  Partn.  428:  Ex  parte  Cook  (1831), 
DjMott   (1893),  51   N.  J.  E(i.  10,  25  Montagu,  228,  Ames'  Cas.  on  Partn. 

432. 
189 


293.] 


LAW    OF    PAETNEESHIP. 


spective  partners  against  the  firm,  as  for  advances  made  or 
money  loaned  to  it,  are  satisfied.  In  equity,  therefore,  the 
individual  creditors  of  one  partner  cannot  reach  his  share 
until  the  claims  of  partners  against  the  firm  have  been  sat- 
isfied.^ 

§  293.  Individual  creditors  usually  given  priority  in 
individual  assets  of  a  partner. —  The  right  of  the  firm 
creditors  to  priority  of  payment  out  of  the  firm  assets  being 
conceded,  it  has  been  urged  that  the  separate  creditors  of 
the  partner  were  entitled  to  a  like  priority  of  payment  out 
of  the  separate  assets  of  the  partner,  and  this  right  has  been 
maintained  by  many,  perhaps  by  a  majority,  of  the  cases  in 
the  United  States,  following  the  early  English  precedents.'^ 
"  The  correctness  of  this  rule,  however,"  it  was  said  in  a  lead- 
ing case,*  "  has  been  much  controverted,  and  there  has  not  al- 


1  See  Buchan  v.  Sumner  (1847),  2 
Barb.  Ch.  (N.  Y.)  165,  47  Am.  Dec. 
305:  Crooker  v.  Crooker  (1863),  52 
Me.  267,  83  Am.  Dec.  509;  Divine  v. 
Mitchum  (1844),  4  B.  Mon.  (Ky.)  488, 
41  Am.  Dec.  241. 

2  See  Hundley  v.  Farris  (1890), 
103  Mo.  78,  15  S.  W.  Rep.  312,  23 
Am.  St.  Rep.  863,  12  L.  R.  A.  254: 
Claflin  V.  Behr  (1889),  89  Ala.  503, 
8  So.  Rep.  45;  Moody  v.  Lucier 
(1883).  62  N.  H.  584;  Greene  v.  But- 
terworth  (1889),  45  N.  J.  Eq.  738,  17 
Atl.  Rep.  949;  Peters  v.  Bain  (1889), 
133  U.  S.  670,  10  Sup.  Ct.  Rep.  354; 
New  Market  Nat.  Bank  v.  Locke 
(1883),  89  Ind.  428;  Rodgers  v.  Me- 
randa  (1857),  7  Ohio  St.  180,  Paige's 
Partn.  Gas.  223. 

^  Rodgers  v.  Meranda,  supra. 

In  Murrill  v.  Neill  (1850),  8  How. 
(U.  S.)  414,  it  is  said:  "Tlie  rule  in 
equity  governing  the  administra- 
tion of  insolvent  partnerships  is 
one  of  familiar  acceptance  and 
practice;  it  is  one  which  will  be 


found  to  have  been  in  practice  in 
this  country  from  the  beginning  of 
our  judicial  history,  and  to  have 
been  generally  if  not  universally 
received.  This  rule,  with  one  or 
two  eccentric  variations  in  the 
English  practice  which  may  be 
noted  hereafter,  is  believed  to  be 
identical  with  that  prevailing  in 
England,  and  is  this:  That  partner- 
ship creditors  shall,  in  the  first  in- 
stance, be  satisfied  from  the  part- 
nership estate;  and  separate  or 
private  creditors  of  the  individual 
partners  from  the  separate  and 
private  estate  of  the  partners  with 
whom  they  have  made  private  and 
individual  contracts;  and  that  the 
private  and  individual  property  of 
the  partners  shall  not  be  applied 
in  extinguishment  of  partnership 
debts  until  the  separate  and  indi- 
vidual creditors  of  the  respective 
partners  shall  be  paid.  The  reason 
and  foundation  of  this  rule,  or  its 
equality  and  fairness,  the  court  is 


190 


APPLICATION   OF   PARTNERSHIP    ASSETS.  [§  2'J3. 

ways  been  a  perfect  ooncurrence  in  the  reasons  assigned  for 
it  by  those  courts  which  have  adhered  to  it.  By  sonid,  it 
has  been  said  to  be  an  arbitrary  rule,  established  from  con- 
siderations of  convenience;  by  others,  that  it  rests  on  the 
basis  that  a  primary  liability  attaches  to  the  fund  on  which 
the  credit  was  given  —  that,  in  contracts  with  a  partnership, 
credit  is  given  on  the  supposed  responsibility  of  the  firm; 
while  in  contracts  with  a  partner  as  an  individual,  reliance 
is  supposed  to  be  placed  on  his  separate  responsibility.  And 
ao-ain,  others  have  assigned  as  a  reason  for  the  rule  that  the 
joint  estate  is  supposed  to  be  benefited  to  the  extent  of  every 
credit  which  is  given  to  the  firm,  and  that  the  separate  es- 
tate is,  in  like  manner,  presumed  to  be  enlarged  by  the  debts 
contracted  by  the  individual  partner;  and  that  there  is  con- 
sequently a  clear  equity  in  confining  the  creditors,  as  to 
preferences,  to  each  estate  respectively  which  has  been  thus 
benefited  by  their  transactions.  But  these  reasons  are  not 
entirely  satisfactory.  So  important  a  rule  must  have  a  bet- 
ter foundation  to  stand  upon  than  mere  considerations  of 
convenience;  and  practically  it  is  undeniable  that  those  who 
give  credit  to  a  partnership  look  to  the  individual  responsi- 
bility of  the  partners  as  well  as  that  of  the  firm;  and,  also, 
those  who  contract  with  a  partner  in  his  separate  capacity 
place  reliance  on  his  various  resources  or  means,  whether  in- 
dividual or  joint.  And  inasmuch  as  individual  debts  are 
often  contracted  to  raise  means  which  are  put  into  the  busi- 
ness of  a  partnership,  and  also  partnership  effects  often  witli- 
drau'n  from  the  firm  and  appropriated  to  the  sejxirate  use 
of  the  partners,  it  cannot  be  practically  true  that  the  sepa- 
rate estate  has  h>een  benefited  to  the  extent  of  every  credit 
given  to  each  individual  partner,  nor  that  the  joint  estate 
has  retained  from  the  separate  estate  of  eacli  ])artner  the 
benefit  of  every  credit  given  to  the  firm."     The  court,  how- 

not  called  upon  to  justify.  Were  of  this  rule  to  stay  tlie  liand  of  iii- 
these  less  oVjvious  tlian  they  are,  it  novation  at  this  day,  at  least  under 
were  enough  to  show  the  early  any  motive  less  strong  than  the 
adoption  and  general   prevalence    most  urgent  propriety." 

191 


§  294.]  LAW   OF   PARTNERSHIP. 

ever,  concluded  that  the  rule  was  well  established,  saying: 
"  Some  general  rule  is  necessary,  and  that  must  rest  on  the 
basis  of  the  unalterable  preference  of  the  partnership  credit- 
ors in  the  joint  effects,  and  their  further  right  to  some  claim 
in  the  separate  property  of  each  of  the  several  partners. 
The  preference,  therefore,  of  the  individual  creditors  of  a 
partner  in  the  distribution  of  his  separate  estate,  results  as 
a  principle  of  equity  from  the  preference  of  partnership 
creditors  in  the  partnership  funds,  and  their  advantage  in 
having  different  funds  to  resort  to,  while  the  individual 
creditors  have  but  one."  But  whether  the  reasons  assigned 
for  the  rule  are  satisfactory  or  not,  the  rule  itself  seems  to 
be  established  by  the  clear  weight  of  authority. 

§  294.  Same  subject  — The  contrary  view. —  Bat  not- 
withstanding the  quite  general  concurrence  in  the  rule  giv- 
ing each  class  of  creditors  priority  in  the  respective  funds, 
it  has  met  with  some  forcible  dissent,'  and  upon  principle 
it  is  difficult  to  be  sustained.  The  true  rule,  from  the 
standpoint  of  principle,  would  seem  to  be  that  inasmuch  as 
each  partner  is  individually  liable  for  the  partnership  debts, 
the  creditors  of  the  firm  (and  therefore  of  each  partner  as 
well),  after  exhausting  the  partnership  assets,  are  entitled  to 
share  equally  with  the  separate  creditors  in  the  separate  as- 
sets of  the  partners.  The  basis  of  this  rule  is  found  in  the 
fact  that  the  partnership  creditor  has  recourse  to  two  funds 
{i.  <?.,  the  partnership  assets  and  the  individual  assets),  while 
the  individual  creditor  has  recourse  to  but  one  fund,  namel}'", 
the  individual  assets;  and  it  is  a  jmnciple  of  equity  that 
where  one  creditor  has  access  to  two  funds  while  another 
creditor  has  access  to  but  one,  the  former  shall  exhaust  the 
separate  fund  before  resorting  to  the  common  fund. 

iSee  Hutzler  V.  Phillips  ("1887),  26  Camp  v.  Grant  (1851),  21  Conn.  41, , 

S.  C.  136,  1  S.  E.  Rep.  502,  4  Am.  St.  54  Am.  Dec.  321,  to  the  effect  that 

Rep.  687;  Blair  v.  Black  (1889),  31  partnership    creditors   may  share 

S.  C.  346,  9  S.  E.  Rep.  1033,  17  Am.  equally  with  individual  creditors 

St.  Rep.  30;  Pettyjohn  v.  Woodruff  in  the  separate  assets. 
(1890),  86  Va.  478,  10  S.  E.  Rep.  715; 

193 


APPLICATION   OF    PARTNERSHIP    ASSETS.       [§§  295-297. 

'  §295.  Same  snl)ject — Rules  apply  only  where  there 
are  two  fuiuls, —  But  either  rule  applies  only  where  there 
are  two  funds.  Thus,  where  there  are  no  partnership  assets 
and  no  solvent  partner,  it  is  usually  held  that  the  partner- 
ship creditors  may  share  equally  with  the  individual  credit- 
ors in  the  separate  assets  of  the  partner.' 

§  296.  Same  subject  —  Firm  cannot  compete  with  indi- 
vidual creditors. —  Passing  next  from  the  right  of  linn 
creditors  as  such  to  compete  with  the  individual  creditors  in 
the  separate  estate  of  one  partner,  the  question  arises  whether, 
if  that  partner  was  indebted  to  the  firm,  the  firm  or  those 
who  represent  it  can  compete  with  the  individual  creditors 
of  that  partner  in  the  distribution  of  his  assets.  As  to  this, 
the  general  rule  is  that  the  firm  or  those  who  represent  it 
cannot  be  permitted  to  compete  with  the  separate  creditors 
of  one  partner  in  the  distribution  of  his  estate.-  An  excep- 
tion to  the  rule  exists  where  the  claim  of  the  firm  against 
the  partner  is  founded  upon  his  wrongful  and  fraudulent 
appropriation  of  firm  assets  to  his  own  use.^ 

§  297.  Same  subject  —  Right  of  partner  to  apply  imli- 
vidual  assets  to  firm  debts. —  Whether  one  partner  will  bo 
permitted  to  apply  his  individual  assets  to  the  payment  of 
the  firm  creditors  and  thereby  exclude  his  own  separate 
creditors,  as  by  making  an  assignment  for  their  benefit  or 

»See  In  re  Lloyd  (1884),  23  Fed.        2,See  Read  v.  Bailey  (1877),  3  App. 

Rep.  88;  In  re  West  (1889),  39  Fed.  Cas.  94,  Ames'  Partn.  Cas.  409;  In 

Rep.  203;  Harris  v.  Pcabody  (1881),  re  Hamilton  (1880),  1  Fed.  Rep.  800; 

73  Me.  2G2;    Curtis  v.  Woodward  Cowan  v.  Gill  (1883),  11  Lea  (Tonn.), 

(1883),  o8  Wis.  409, 4(5  Am.  Rep.  647;  G74;  Lodge  v.  Fendal  (1790),  1  Vesoy. 

Alexanderv.  Gorman  (1880),  ir>RL  Jr.    166,   Ames'    Partn.    Cas.    394. 

421.     Contra,   Howe   v.  Lawrence  Contra,  Bird  v.  Bird  (1885),  77  Me. 

(1852),  9  Cush.  (Mass.)  .553,  57  Am.  499,  1  Atl.  Rep.  455. 
Doc.  68;  Warren  v.  Farmer  (1884),        'See  Ex  parte  Sillitoe  (1824),  1 

100  Ind.  593;  In  re  Gray  (1888),  111  Glyn  &  Jameson,  374,  Ames'  Cas. 

N.  Y.  404.  on  Partn.  428. 
13                                         193 


§  298,]  LAW    OF    PARTNERSHIP. 

giving  them  the  preference  in  assigning  his'estate,  is  a  ques- 
tion upon  which  the  authorities  are  in  conflict,  as  they  have 
been  seen  to  be  respecting  the  right  of  tirm  creditors  to  share 
equally  with  the  individual  creditors  in  the  partner's  separate 
estate.^  Substantially  similar  considerations  apply  to  each 
question.  It  is  said,  on  the  one  hand  that  inasmuch  as  the 
firm  creditors  are  equally  creditors  of  the  partners  as  in- 
dividuals, there  is  no  reason  why  the  individual  partner 
should  not  pay  them  out  of  his  own  estate  if  he  so  prefers.' 
On  the  other  hand,  it  is  urged  that  the  separate  creditors 
have  a  first  claim  upon  the  separate  assets,  and  to  permit 
them  to  be  diverted  to  the  payment  of  the  firm  creditors 
is  a  fraud  upon  the  separate  creditors.*  The  former  would 
seem  to  be  the  better  view. 

§  298.  Right  of  partners  to  convert  firm  property  into 
individual  property. —  Intimately  connected  with  the  ques- 
tions already  considered  is  that  of  the  power  of  the  part- 
ners, by  an}'^  arrangement  among  themselves,  to  so  divest 
themselves  of  their  own  lien  upon  the  partnership  property 
that  the  right  of  the  firm  creditors  to  priority  of  payment 
out  of  that  property —  which  right,  as  has  been  seen,  depends 
upon  the  partners'  right  —  shall  be  cut  off.*  Thus,  for  ex- 
ample, may  one  partner  on  retiring  from  the  firm  sell  out 
all  of  his  interest  in  the  partnership  assets  to  his  copartner, 
who  continues  the  business,  in  such  a  way  that  the  latter 
may  thereafter  apply  those  assets  to  the  payment  of  his  in- 
dividual debts  to  the  exclusion  of  the  firm  creditors?  May 
both  partners  by  selling  to  a  third  person  thus  divest  their 
firm  creditors  of  their  priorities  in  the  property  so  sold? 

These  questions  are  but  another  form  of  that  already  con- 

1  See  ante,  §§  285,  286.  » See  Holtea  v.  Holton  (1860),  40 

2 See  Newman  v.  Bagley  (1835),  N.  H.  77,  Ames'  Partn.  Cas.  332; 

16   Pick.  (Mass.)  570;   Gadsden  v.  Jackson  v.  Cornell  (1844),  1  Sandf. 

Carson  (1857),  9  Rich.  Eq.  (S.  C.)  252;  (N.  Y.)  Ch.  348. 

Chessher  v.  Clam  (1895),  —  Tex.  <  See  ante,  §  283. 

Civ,  App.  — ,  30  S.  W.  Eep.  466, 

194 


APPLICATION    OF   PARTNERSHIP    ASSETS.  [§  298. 

sidered,  namely,  the  right  of  the  partners  to  apph^  firm 
assets  to  the  payment  of  individual  debts.^  They  rest  upon 
substantially  the  same  considerations  and  present  substan- 
tially the  same  conflict  of  opinion.  That  solvent  partners, 
acting  in  good  faith,  may  do  so,  seems  to  be  conceded.^  That 
it  may  also  be  done,  though  the  partners  are  not  solvent,  if 
done  in  good  faith  and  for  a  valuable  consideration,  has  also 
been  held.^  Whether  the  mere  assumption  of  the  debts  by 
the  continuing  partner  is  a  sufficient  consideration  is  in 
question.  In  a  late  case*  it  is  said:  "It  is  clear  that  while 
the  partnership  is  solvent  and  going  on,  the  partners  may, 
by  unanimous  assent  or  joint  act,  do  what  they  please  with 
the  assets,  if  the  act  is  hona  fide.  Where,  in  such  case,  one 
partner  sells  or  assigns  his  interest  to  the  other,  hona  fide, 
for  a  valuable  consideration,  or  an  agreement  to  pay  the 
debts  of  the  firm,  and  indemnify  against  them,  this  will 
change  the  joint  into  a  separate  property.  The  only  ques- 
tion is  upon  the  hona  fides  of  the  transaction.  If  such  an 
arrangement  could  not  be  made,  a  partner  could  never  re- 
tire. On  the  other  hand,  according  to  the  better  reason  and 
the  weight  of  authority,  if  the  firm  is  insolvent,  or  on  the 
eve  of  insolvency,  and  both  of  the  partners  are  insolvent,  a 
purchase  b}^  one  partner  of  the  interest  of  the  other,  in  con- 
sideration of  the  former's  assum])tion  of  all  the  debts  of  the 
firm,  will  be  regarded  as  a  purchase  upon  a  consideration 
which  is  of  no  value  whatever;  and,  no  equivalent  having 
been  given,  the  transfer  is  in  effect  voluntary,  and  its  only 
effect,  if  sustained,  would  be  to  hinder  partnership  creditors, 
and  hence  is  deemed  ineffectual  to  convert  the  joint  prop- 
erty into  separate  property  as  against  the  firm  creditors." 

'  See  ante,  %  288.  (1851),  21  Conn.   130,  54  Am.  Deo. 

2  See  Fulton  v.  Hughes  (1885),  63  333;  Howe  v.    Lawrence  (1852),  9 
Miss.  61 ;  Stanton  v.  Westover  (1886),  Cush.  (Mass.)  553,  57  Am.  Dec.  68. 
101  N,  Y.  205;  Ketchum  v.  Durkee        <  Darby  v.  Gilligan  (1889),  33  W. 
(1846),  1  Barb.  (N.  Y.)  Ch.  480,  45  Va.  24<5,  10  S.  K.  licp.  400,6  L.  R  A. 
Am.  Dec.  413.  740,  citing  many  cases. 

3  See  Allen  v.  Center  Valley  Co. 

195 


§  299.]  LAW   OF   PARTNERSHIP. 

Another  view  of  similar  transactions  leading  to  the  same 
result  is  that  the  stipulation  that  the  continuing  partner 
shall  pay  the  debts  operates  not  to  release  but  to  continue 
the  selling  partner's  lien  upon  the  assets,  unless  expressly 
waived,  and  therefore  the  firm  creditors  may  still  work  out 
their  priority  through  his  lien,  until  the  property  has  come 
into  the  hands  of  a  hona  fide  purchaser.^ 

§  299.  Application  of  assets  when  there  was  no  osten- 
sible partnership  —  When  there  Avas  merely  an  ostensible 
bnt  not  an  actual  partnership. —  Questions  as  to  the  proper 
application  of  the  assets  also  arise  where  there  was  really  a 
partnership  between  the  parties,  but  there  was  none  osten- 
sibly, as  where,  of  two  partners,  one  was  dormant  and  the 
other  appeared  to  the  public  as  the  sole  dealer.  "  In  such  a 
case,"  say  the  court  in  Tennessee,"  "  the  ordinary  rules  touch- 
ing partnership  transactions  and  partnership  property  do  not 
apply.  The  dormant  partner  has  clearly  no  equity  to  re- 
quire the  application  of  the  partnership  property  to  the 
payment  of  the  firm  debts  to  his  exoneration,  as  against  the 
creditors  of  the  ostensible  partner  who  has  been  dealt  with 
as  the  sole  owner.^  And  the  creditors  of  the  firm,  who  have 
no  equity  except  such  as  can  be  worked  out  through  the 
dormant  partner,  cannot  require  that  the  partnership  prop- 
erty be  first  applied  to  the  satisfaction  of  their  debts.*  It  is 
a  race  of  diligence  between  the  two  classes  of  creditors,  and 
equity  will  not  interfere  to  deprive  either  of  a  legal  advan- 
tage." 

The  reverse  of  this  case  also  arises  where  two  persons  are 
ostensibly  partners,  but  are  not  really  such.     The  rule  ap- 

'See  Bulger  v.  Rosa  (1890),  119  -^Whitworth  v.  Patterson  (1880), 
N.  Y.  459,  24  N.  E.  Eep.  853;  Olson     6  Lea,  119. 

V.   Morrison  (1874),  29   Mlcli.  395;        sCammack  v.  Johnson  (1839),  3 
Thayer  v.  Humphrey  (1895),  —  Wis.     N.  J.  Eq.  163. 
— -,  64  N.  W.  Rep.  1007,  30  L.  R.  A.        ■»  French  v.  Chase  (1829),  6  Me. 
549.  166;  Lord  v.  Baldwin  (1828).  6  Pick. 

(Mass.)  348. 
196 


APPLICATION    OF    PARTNERSHIP   ASSETS.  [§  300. 

plied  here,  as  declared  in  a  recent  case  in  "Wisconsin,^  is, 
"•  that  if  a  person  allows  another  to  carry  on  business  in  such 
a  way  as  to  amount  to  a  holding  out  to  persons  generally 
that  he  and  such  other  are  partners,  and  credit  is  given  to 
both  on  the  supposition  that  they  are  partners  in  fact,  the 
propert}'  Avith  which  such  business  is  carried  on,  though  in 
law  that  of  such  person,  in  equity  will  be  treated  as  the 
joint  property  of  such  person  and  such  other;  and  neither 
of  them,  nor  the  creditors  of  either,  can  prove  up  in  insolv- 
ency in  competition  with  the  creditors  who  have  trusted  the 
two  as  partners  and  the  business  as  that  of  the  two." 

§  300.  Equitable  rules  do  not  defeat  legal  priorities. — 

But  these  rules  of  distribution  prevailing  in  courts  of  equity 
do  not  usually  operate  to  defeat  priorities  previously  ac- 
quired in  legal  proceedings.  Thus,  it  has  been  held  that  the 
lien  of  a  judgment,  rendered  after  the  death  of  one  partner, 
but  for  a  partnership  debt,  and  attaching  to  the  individual 
real  estate  of  the  surviving  partner,  will  not  be  disturbed 
in  favor  of  a  later  judgment  against  such  survivor  for  his  in- 
dividual debt,  even  though  such  later  judgment  cannot  other- 
wise be  satisfied,  and  it  was  alleged  that  the  prior  one  might 
have  been  satisfied  out  of  the  estate  of  the  deceased  part- 
ner.2  Selden,  J.,  after  referring  to  the  rule  prevailing  in 
courts  of  equity,  as  already  noticed,  said :  "  This,  however,  is 
a  rule  which  prevails  in  courts  of  equity  in  the  distrihution 
of  equitable  assets  only.  Those  courts  have  never  assumed 
to  exercise  the  power  of  setting  aside,  or  in  an}'^  way  inter- 
fering with,  an  absolute  right  of  priority  obtained  at  law. 
In  regard  to  all  such  cases  the  rule  is,  Kqaitas  sc<iultur  legem P 
So  where  the  individual  credits  of  one  partner  had  been 
attached  at  the  suit  of  the  lirm  creditors  and  were  siibsc- 

1  Thayer  v.  Humplirey  (1895),  91    699,  40  N.  W.  Rop.  87*J.  24  Am.  St. 
Wis.  27fi,  64  N.  W.  Rep.  1007,  30  L.    Rep.  182. 

R.  A.  549.  To  same  effect:  Van  SMeecli  v.  Allen  (1858),  17  N.  Y.- 
Kleeck  v.  McCabe  (1891),  87  Mich.     5i00,  72  Am.  Dec.  405,  Ames'  Cas. 

on  Partn.  320. 
197 


§  300.]  LAW    OF   PAKTNEKSHIP. 

quently  attached  by  his  individual  creditor,  it  was  held  that 
the  prior  lien  was  effectual.'  The  court  said  that  it  was 
settled  law  in  Massachusetts,  though  otherwise  in  NeAV 
Hampshire,  that  "  in  a  suit  against  two  or  more  copartners 
upon  their  joint  debt,  the  separate  property  of  any  one  of 
the  partners  may  be  attached,  and  the  lien  so  acquired  is 
not  discharged  or  impaired  by  a  subsequent  attachment  of 
the  same  property  upon  a  suit  in  favor  of  a  separate  cred- 
itor of  the  same  partner." 

1  Stevens  v.  Perry  (1873),  113  Mass.     like  effect:  Allen  v.  Wells  (1839),  23 
380,  Ames'  Cas.  on  Partn.  330.    To    Pick.  (Mass.)  450,  33  Am.  Dec.  757. 

198 


CHAPTER  XX. 


OF  THE  FINAL  ACCOUNTING. 


301.  Necessity  for  accounting. 
802.  Basis  of  accounting. 

303.  Same    subject  —  Riglits    of 

general   creditors  to  pre- 
sent claims. 

304.  Partnership  debts  to  be  first 

paid. 


§  305,  306.  Manner  of  accounting. 

307,308.  Same  subject  — Loss  of 
capital,  how  borne. 

309.  Opening  and  restating  ac- 
counts. 


§301.  Necessity  of  accouutiug. —  Upon  the  termination 
of  the  partnership,  either  by  the  act  of  the  parties  or  the  act 
of  law,  an  accounting  becomes  necessar}^  If  the  firm  is 
solvent,  and  the  partners  agree,  they  may  close  up  their 
affairs,  pay  their  debts  and  distribute  the  surplus,  by  their 
own  act;  but  if  they  cannot  agree,  or  if  the  firm  is  insolvent 
and  there  are  conflicting  claims,  an  accounting  in  court  be- 
comes necessary.  As  has  been  already  seen,^  the  court  of 
equity  is  the  forum  in  which  partnership  accounts  are  to  be 
settled,  and  something  has  been  already  said  as  to  who  is 
entitled  to  demand  an  accounting.-  It  has  been  sometimes 
said  that  the  right  to  demand  an  accounting  is  a  test  of  being 
a  partner,  but  the  true  theory  seems  to  be  that  the  right  to 
an  accounting  follows  because  one  is  a  partner 

§  302.  Basis  of  the  accoiiutiiis.— It  has  been  scen»  that 
it  is  the  duty  of  each  partner  to  kee])  full  and  accurate  ac- 
counts of  his  partnership  transactions,  and  that  if  he  fails 
to  do  so,  every  uncertainty  resulting  therefrom  will  i)c  re- 
solved against  him.  It  has  been  seen  also^  that  all  i)rollts 
and  advantages  resulting  from  liini  ti'ansiutions  must  be 
accounted  for,  even  though  done  in  tlu!   name  of  one  part- 


1  Ante,  g  153. 
"^Ante,  §154. 


»Se(,'  cnitc,  ^  no. 
4^l)i<f,  g  112. 


190 


§§  303,  304.]  LAW    OF    PAETNEESHIP. 

ner  only;  and  that  a  partner  is  not  entitled  to  extra  com- 
pensation or  interest  in  the  absence  of  an  agreement  to  pay 
it.^  It  has  been  seen,  moreover,  that  the  claims  of  partners 
for  contribntion  as  to  debts  paid,  for  reimbursement  for  ad- 
vances, for  indemnity  against  liability,  and  most  other  claims 
and  demands  arising  between  the  partners  themselves,  are  to 
be  settled  upon  the  final  accounting.'-  Such  an  accounting 
becomes,  therefore,  the  one  great  occasion  for  a  comprehen- 
sive and  effective  settlement  of  partnership  demands,  between 
the  partners. 

§303.  Same  sulyect  —  Right  of  general  creditors  to 
present  their  demands. —  But  the  claims  of  the  partners  as 
between  themselves  are  not  the  only  ones  to  be  adjusted  on 
the  accounting.  The  claims  of  firm  creditors  are  also  to  be 
ascertained  and  paid,  and  they  may  be  presented  for  that 
purpose  and  proven  without  the  commencement  of  separate 
actions  to  enforce  them. 

A  sale  of  the  partnership  assets  is  then  to  be  made,  and  is 
practically  a  matter  of  course,  unless  for  special  reason  shown 
some  other  method  of  disposition  is  ordered. 

When  the  assets  have  thus  been  reduced  to  an  available 
and  distributable  form,  and  the  claims  of  the  partners  among 
themselves  and  of  creditors  against  the  firm  have  been  as- 
certained, the  estate  is  ready  for  distribution  among  those 
entitled  according  to  the  priorities  which  the  law  establishes. 

§304.  Partnership  dehts  to  be  first  paid. —  It  follows 
from  what  has  been  said  as  to  the  application  of  the  firm 
assets*  that  the  partnership  debts  are  to  be  paid  first,  and 
that  claims  of  the  individual  partners  against  the  firm  or 
each  other  cannot  compete  with  the  claims  of  the  firm  cred- 
itors. It  is  thus  said  to  be  a  general  rule  that  by  no  form 
of  claim  can  one  partner  compete  with  the  firm  creditors  in 
the  distribution  of  the  firm  assets.^ 

1  Ante,  gg  119,  120.  3  gee  ante,  %%  389,  291. 

^Ante,  §  127.  '*See  Edison  Illuminating  Co.  v. 

200 


FINAL    ACCOUNTING.  [§§  305,  306. 

§  305.  Manner  of  accownting.—  Mr.  Justice  Lindlev  lavs 
clown  the  following  rules,*  which  have  been  generally  adopted, 
as  to  the  manner  of  accounting:  "In  adjusting  the  accounts 
of  partners,  losses  ought  to  be  paid  first  out  of  assets  exclud- 
ing capital,  next  out  of  capital,  and  lastly  by  having  recoui-se 
to  the  partners  individually;  and  the  assets  of  the  partner- 
ship should  be  applied  as  follows: 

"  1.  In  paying  the  debts  and  liabilities  of  the  firm  to  non- 
partners. 

"  2.  In  paying  to  each  partner  ratably  what  is  due  from  the 
firm  to  him  for  advances  as  distinguished  from  capital. 

"  3.  In  paying  to  each  partner  ratably  what  is  due  from  the 
firm  to  him  in  respect  of  capital. 

"  4.  The  ultimate  residue,  if  any,  will  then  be  divisible  as 
profit  between  the  partners  in  equal  shares,  unless  the  con- 
trary be  shown." 

§  306.  Same  subject.— "  If  the  assets  are  not  sufficient  to 
pay  the  debts  and  liabilities  to  non-partners,"  continues  Mr. 
Justice  Lindley,  "  the  partners  must  treat  the  difference  as 
a  loss  and  make  it  up  by  contributions  inter  se.  If  the  as- 
sets are  more  than  sufficient  to  pay  the  debts  and  liabilities 
of  the  partnership  to  non-partners,  but  are  not  sufficient  to 
repay  the  partners  tbcir  respective  advances,  the  amount  of 
unpaid  advances  ought,  it  is  conceived,  to  be  treated  as  a 
loss  to  be  met  like  other  losses.  In  such  a  case  the  advances 
ought  to  be  treated  as  a  debt  of  the  firm,  but  jmyablo  to  one 
of  the  partners  instead  of  to  a  stranger.  If,  after  paying  all 
the  debts  and  liabilities  of  the  firm  and  the  advances  of  the 
partners,  there  is  still  a  surplus,  but  not  sufficient  to  ]>ay 
each  partner  his  capital,  the  balances  of  ca])itals  remaining 
unpaid  must  bo  treated  as  so  many  losses,  to  be  met  like 
other  losses." 

DcMott  (1803),  r,L  N.  J.   Eq.   10,25        12  Lin. Hoy  on   rartiRT.'sIiii),  Wi 
Atl.   Rep.   952;   Ex    parte    Blytlie    (Ewoll's  2a  Am.  cd). 
(1881),  10  Ch.  Div.  020. 

201 


§§  307,  30S.]  LAW    OF    PARTNERSHIP. 

§  307.  Same  subject  —  Loss  of  capital,  how  borne.— 

"  In  the  absence  of  controlling  agreement/'  said  the  court  in 
a  leading  case/  "  partners  must  bear  the  losses  in  the  same 
proportion  as  the  profits  of  the  partnership,  even  if  one  con- 
tributes the  whole  capital  and  the  other  nothing  but  his 
labor  or  services.  Whether  a  loss  of  capital  is  a  partnership 
loss,  to  be  borne  by  all  the  partners,  depends  upon  the  nat- 
ure and  extent  of  the  contract  of  partnership. 

"  If,  as  is  not  infrequently  the  case  in  a  partnership  for  a 
single  adventure,  the  mere  use  of  the  capital  is  contributed 
by  one  partner,  and  the  partnership  is  in  the  profits  and 
losses  only,  the  capital  remains  the  property  of  the  individual 
partner  to  whom  it  originally  belonged,  any  loss  or  destruc- 
tion of  it  falls  upon  him  as  the  owner,  and,  as  it  never  be- 
comes the  property  of  the  partnership,  the  partnership  owes 
him  nothing  in  consideration  thereof. 

"  But  where,  as  is  usual  in  an  ordinary  mercantile  part- 
nership, a  partnership  is  created  not  merely  in  profits  and 
losses,  but  in  the  property  itself,  the  property  is  transferred 
from  the  original  owners  to  the  partnership  and  becomes 
the  joint  property  of  the  latter:  a  corresponding  obligation 
arises  on  the  part  of  the  partnership  to  pay  the  value  thereof 
to  the  individuals  who  originally  contributed  it ;  such  pay- 
ment cannot,  indeed,  be  demanded  during  the  continuance  of 
the  partnership,  nor  are  the  contributors,  in  the  absence  of 
agreement  or  usage,  entitled  to  interest;  but,  if  the  assets 
of  the  partnership  upon  a  final  settlement  are  insufficient  to 
satisfy  this  obligation,  all  the  partners  must  bear  it  in  the 
same  proportion  as  other  debts  of  the  partnership." 

§  308.  Same  subject. —  In  accordance  with  these  princi- 
ples, it  is  held  that  where  one  partner  contributes  experience 
and  the  other  money,  the  former  is  not,  upon  dissolution,  en- 
titled to  any  part  of  the  cash  capital,  but  each  takes  back 
what  he  put  in  —  one  his  experience,  and  the  other  his 
money.-     If,  however,  where  one  contributes  labor  and  the 

1  Whitcomb  v.  Converse  (1875),  2  shea  v.  Donahue  (1885),  15  Lea 
119  Mass.  38,  20  Am.  Rep.  311.  (Tenn.),  160,  54  Am.  Rep.  407;  Con- 

202 


FINAL    ACCOUNTING.  [§  309. 

other  money,  there  is,  upon  dissolution,  a  loss  of  capital,  the 
one  who  contributed  his  labor  must  aid  in  making  good  the 
loss  of  the  other  who  contributed  money .^ 

In  making  contribution  at  law,  the  loss  is  divided  equally 
among  the  whole  number,  without  regard  to  their  solvency 
or  insolvency ;  but  in  equity  the  loss  is  made  to  rest  upon 
the  solvent  partners  alone.- 

§  309.  Opeiiiug  and  restating  accounts. —  When  once  a 
partnership  account  has  been  settled,  it  will  not  be  easily 
disturbed,  particularly  if  much  time  has  elapsed.  Still,  even 
after  long  acquiescence,  an  account  may  be  reopened  and 
corrected  if  fraud  was  practiced  in  the  first  accounting;  and, 
within  a  reasonable  time,  an  account  may  be  reopened  for 
the  correction  of  errors  or  omissions.  The  fraud,  however, 
must  be  clearly  stated  and  proved,  and  the  mistake  or  omis- 
sion must  be  as  to  some  matter  not  known  to  the  complain- 
ing party  at  the  time  it  was  committed.' 

roy  V.  Campbell,  13  Jones  &  Sp.  (1890),  123  Intl.  47,  23  N.  E.  Rep. 

(X.  Y.)326.  1076,  7  L.  R.  A.  788;  Merriwetlier 

1  Whitconib  v.  Converse,  supra,  v.  Hardeman   (1879),  51   Tex.  436; 

^Whitcomb  v.  Converse,  siipra;  Varner's  Appeal  (18 — ),  2Monaglian 

1  Lindley  on  Partnership  (E well's  (Pa.),  228;  Cobb  v.  Cole  (1890),  44 

2d  Am.  ed.),  376.  Minn.  278,  46  N.  W.  Rep.  364;  King 

3  See  Claflin  v.  Bennett  (1892),  51  v.  White  (1890),  63  Vt.  158,  21  Atl. 

Fed.  Rep.  693;  Valentine  v.  Wysor  Rep.  535,  25  Am.  St.  Rep.  752. 

203 


CHAPTEE  XXL 

OF  LIMITED  PARTNERSHIPS. 


§  310.  Of  the  nature  of  such  part- 
nerships. 

311.  They  must  be  authorized  by 
statute. 

313.  The  usual  statutory  require- 
ments. 


§  313.  Necessity    for     compliance 
with  statute. 

314.  What  business  may  be  con- 

ducted. 

315.  How  business  conducted. 

316.  Dissolution  and  notice. 


§  310.  Of  the  nature  of  siicli  partnerships. —  Something 
has  been  ah^eady  said  in  relation  to  these  partnerships,^  but 
they  require  a  little  fuller  consideration.  The  purpose  of 
such  organizations  is  to  permit  the  formation  of  partner- 
ships in  which  some  of  the  partners  who  manage  the  busi- 
ness shall  have  the  general  personal  liability  of  ordinary 
partners,  while  other  of  the  partners  who  take  no  part  in 
the  management  may  contribute  a  given  amount  of  capital 
and  assume  no  liability  beyond  the  amount  so  contributed. 

§  311.  Must  he  authorized  hy  statute, —  Partnerships  of 
this  nature  can  be  organized  only  when  permitted  by  stat- 
ute, but  statutes  have  been  enacted  for  this  purpose  in  the 
majority  of  the  states. 

§  312.  The  usual  statutory  requirements. —  The  statu- 
tory provisions  are  not  entirely  uniform,  but  they  are  sub- 
stantially so.  They  require  usually  the  execution  of  a  cer- 
tificate which  shall  set  forth  who  the  partners  are,  with  their 
residence ;  who  are  to  be  the  general  partners,  and  who  the 
special  partners ;  the  name  under  which  the  partnership  is 
to  do  business;  the  amount  of  capital  actually  contributed 

1  Ante,  S  7. 
204 


LIMITED    PARTXERSHIPS.  [§313 

bv  the  special  partners;  the  business  to  be  conducted,  and 
the  date  at  which  the  partnership  is  to  begin  and  end. 

This  statement  or  certificate  is  to  be  published  for  a  desio-- 
na  ed  period,  and  is  also  to  be  recorded  in  some  specifie'd 
pubhc  office. 

The  names  of  all  the  general  partners  must  usuallvappear 
in  the  firm  name  (though  the  statutes  are  not  uniform  on 
this  pomt)^but  the  names  of  the  special  partners  must  not 
appear  Where  the  names  of  all  the  general  partners  are 
required  to  be  in  the  firm  name,  there  must  usually  be  no 
such  addition  as  "&  Co.,"  indicating  that  there  are  other 
general  partners.  They  are  sometimes  required  to  add  the 
word  "limited"  to  the  firm  name. 

The  contribution  of  the  special  partners  is  usually  required 
to  be  m  cash,  and  when  this  is  the  requirement  the  courts 
are  very  strict  in  refusing  to  recognize  anything  but  cash  as 
suincient.* 

§  313.  Necessity  for  compliance  with  requirements  - 

Inasmuch  as  the  effect  of  such  organizations  is  to  restrict  the 
ordmary  liabilities  of  partners,  it  is  held  that  there  must  be 
at  least  a  substantially  full  and  exact  compliance  with  the 
statutory  requirements.^ 

And  since  it  is  only  by  force  of  the  statute  that  the  lim- 
ited liability  is  secured,  it  follows  that  a  failure  to  comply 
with  the  statutory  requirements  will  render  the  special  part- 
ners liable  to  third  persons  like  general  partners.^     As  is 

p/m?!:'""'''^^''^'''-^^^^'^^^^^'^^'  (1885).  109  Pa.  St  373,1  Atl  Ren 
G4  Md.  4G5,  54  Am.  Rep.  775;  In  re    174  ^ 

tTsT'^^  ''  ""'""  ''"'  ''  ""•  '^'        ^^^^  ^'^^^^«  ^-  S*'-«°^  (1889),  128 
2  a      Z  ,^  rr  „  ^''-  ^*'  ^15»  18  Atl.  Rep.  397;  Van- 

See  Selden  v.  Hall  (1886).  21  Mo.    horn  v.  Corcoran  (1880).  127  p,  g 

t!T4  -i  Tn '*'  ""'  '^'''™^"  ^'^''^'  ^^•^'  4  L.  R.  A.  38G  18  Atl.  Re  1(  •" 
14  N.  Y.  101.31  N.  E.  Rep.  Sro;  Mani.attan  Ca  v.  Lain.beer  88  ) 
Lineweaver  v.  Slagle  (1885),  04  Md.     108   N.  Y.  578,  15  N.  E.  Rep   71- 

tt^'t^T  ,^'P"  ''''  '  ^'''  ^^1'-  ^'••'-'^  Hill  C.  &  I.  Co.  V.  At  as 
09..;  Haddock  v.Grinnell  Mfg.  Co.    Works  (1891),  140  Pa.  St.  290, 23  Atl 

Rep.  326. 


§§  314-316.]  LAW    OF    PAKTNERSHIP. 

said  in  a  recent  case,^  ^^  prima  facie,  a  firm  transacting  busi- 
ness is  a  general  partnership.  .  .  .  A  limited  partnership 
that  has  not  complied  with  the  law  of  its  creation  is  not  a 
limited  partnership  at  all.  It  is,  however,  a  partnership  in 
which  all  the  members  are  liable  as  at  common  law." 

§  314.  For  what  business  authorized. —  In  many  of  the 
states  no  restrictions  are  placed  upon  the  kind  of  business 
that  may  be  carried  on  by  a  special  partnership ;  in  others 
certain  kinds  of  business,  usually  insurance  and  banking,  are 
excepted. 

§  315.  Conduct  of  business. —  The  general  partners  alone 
represent  the  firm  and  carry  on  its  business.  If  the  special 
partner  takes  part  in  its  management  he  becomes  liable  as 
a  general  partner.  Contracts  must  therefore  be  made  by 
and  in  the  name  of  the  general  partners,  and  suits  must  be 
brought  by  and  against  them.- 

§  316.  Dissolution  and  notice. —  The  partnership  may  be 
renewed  by  a  renewal  of  the  certificate,  publication  and 
record.  Otherwise  it  comes  to  an  end  as  a  limited  partner- 
ship at  the  time  designated,  and  if  continued  afterward  it 
will  be  as  a  general  partnership.  It  may  also  be  terminated 
before  by  operation  of  law  or  the  act  of  the  partners,  like 
general  partnerships.  Where  it  is  so  terminated  before  the 
time  limited  has  expired,  and  no  statutory  provision  for  no- 

1  Blumenthal  v.  Whitaker  (1895),  defeat  it  (Manhattan  Co.  v.  Laim- 

170  Pa.  St.  309,  33  AtL  Rep.  103.   The  beer,  supra),  unless  the  party  was 

statutes  themselves  often  provide  himself  in  fault.     Henkel  v.  Hey- 

that  a  false  statement  in  the  cer-  man  (1878),  91  111.  96. 

tificate  shall  defeat  the  limited  lia-  2  gee  Columbia  Land  and  Cattle 

bility.     Sheble    v.   Strong,   supra;  Co.  v.  Daly  (1891),  46  Kan.  504,  26 

Durant  v.  Abendroth  (1877),  69  N.  Pac.  Rep.  1042;  Sharp  v.  Hutchin- 

Y.  148,  25  Am.  Rep.  158.     But  the  son  (1885),  100  N.  Y.  533;  Jaflfe  v. 

failure  of  the  recording  officer  to  Krum  (1885),  88  Mo.  669. 
properly  record  will  not  usually 

206 


LIMITED    PARTNERSHIPS.  [§  310. 

tice  is  made,  notice  must  usually  be  given  in  the  same  cases 
and  manner  as  upon  the  dissolution  of  a  general  partnership; 
though  where  it  is  terminated  by  the  act  of  the  partner  be- 
fore the  expiration  of  the  stipulated  term,  the  statutes  usu- 
ally require  that  notice  shall  be  published  and  recorded  like 
the  original  certificate.  Where  it  comes  to  an  end  by  ex- 
piration of  the  time  fixed,  no  notice  is  necessary,  as  the 
published  and  recorded  certificate  gives  notice  to  all  the 

world. 

207 


APPENDIX  A. 


THE  ENGLISH  PARTNERSHIP  ACT,  1800. 

<53  &  54  Vict.,  ch.  39.) 
An  Act  to  declare  and  amend  the  Law  of  Partnership. 
(14th  August,  1890.) 
Be  it  enacted  by  the  Queen's  most  Excellent  Majesty,  by 
and  with  the  advice  and  consent  of  the  Lords  Spiritual  'and 
Temporal,  and  Commons,  in  this  present  Parliament  assem- 
bled, and  by  the  authority  of  the  same,  as  follows: 

1.  (1)  Partnership  is  the  relation  which  subsists  between 
persons  carrying  on  a  business  in  common  with  a  view  of 
profit. 

(2)  But  the  relation  between  members  of  any  company  or 
association  which  is  — 

(a)  Registered  as  a  company  under  the  Companies 
Act,  1862,  or  any  other  Act  of  Parliament  for  the  time 
bemg  in  force  and  relating  to  the  registration  of  joint- 
stock  companies ;  or 

(b)  Formed  or  incorporated  by  or  in  pursuance  of 
any  other  Act  of  Parliament  or  letters  patent,  or  Koval 
Charter;  or 

(c)  A  company  engaged  in  working  mines  within  and 
subject  to  the  jurisdiction  of  the  Stannaries: 

IS  not  a  partnership  within  the  meaning  of  this  Act. 

2.  In  determining  whether  a  partnership  does  or  does  not 
exist,  regard  shall  be  had  to  the  following  rules: 

(1)  Joint  tenancy,  tenancy  in  common,  joint  property 
common  property,  or  part  ownershi])  does  not  of  itself  cre^ 
ate  a  partnership  as  to  anything  so  held  or  owned,  whether 

1^  209 


APPENDIX    A. 

the  tenants  or  owners  do  or  do  not  share  any  profits  made 
by  the  use  thereof, 

(2)  The  sharing  of  gross  returns  does  not  of  itself  create 
a  partnership,  whether  the  persons  sharing  such  returns  have 
or  have  not  a  joint  or  common  right  or  interest  in  any  prop- 
erty from  which  or  from  the  use  of  which  the  returns  are 
derived. 

(3)  The  receipt  by  a  person  of  a  share  of  the  profits  of  a 
business  is  prima  facie  evidence  that  he  is  a  partner  in  the 
business,  but  the  receipt  of  such  a  share  or  of  a  payment 
contingent  on  or  varying  with  the  profits  of  a  business  does 
not  of  itself  make  him  a  partner  in  the  business ;  and  in  par- 
ticular — 

(a)  The  receipt  by  a  person  of  a  debt  or  other  liqui- 
dated amount  by  instalments  or  otherwise  out  of  the 
accruing  profits  of  a  business  does  not  of  itself  make  him 
a  partner  in  the  business  or  liable  as  such. 

(b)  A  contract  for  the  remuneration  of  a  servant  or 
agent  of  a  person  engaged  in  a  business  by  a  share  of 
the  profits  of  the  business  does  not  of  itself  make  the 
servant  or  agent  a  partner  in  the  business  or  liable  as 
such. 

(c)  A  person  being  the  widow  or  child  of  a  deceased 
partner,  and  receiving  by  way  of  annuity  a  portion  of 
the  profits  made  in  the  business  in  which  the  deceased 
person  was  a  partner,  is  not  by  reason  only  of  such  re- 
ceipt a  partner  in  the  business  or  liable  as  such. 

(d)  The  advance  of  money  by  way  of  loan  to  a  person 
engaged  or  about  to  engage  in  any  business  on  a  con- 
tract with  that  person  that  the  lender  shall  receive  a 
rate  of  interest  varying  with  the  profits,  or  shall  receive 
a  share  of  the  profits  arising  from  carrying  on  the  busi- 
ness, does  not  of  itself  make  the  lender  a  partner  with 
the  person  or  persons  carrying  on  the  business  or  liable 
as  such.  Provided  that  the  contract  is  in  writing  and 
signed  by  or  on  behalf  of  all  the  parties  thereto. 

(e)  A  person  receiving  by  way  of  annuity  or  other- 

210  *^ 


ENGLISH    PARTIST5RSHIP    ACT. 

■wise  a  portion  of  the  profits  of  a  business  in  considera- 
tion of  the  sale  by  him  of  the  good-will  of  the  business 
is  not  by  reason  only  of  such  receipt  a  partner  in  the 
business  or  liable  as  such. 

3.  In  the  event  of  any  person  to  whom  money  has  been 
advanced  by  way  of  loan  upon  such  a  contract  as  is  men- 
tioned in  the  last  foregoing  section,  or  of  any  buyer  of  a 
good-will  in  consideration  of  a  share  of  the  profits  of  the 
business,  being  adjudged  a  bankrupt,  entering  into  an  ar- 
rangement to  pay  his  creditors  less  than  twenty  shillings  in 
the  pound,  or  dying  in  insolvent  circumstances,  the  lender 
of  the  loan  shall  not  be  entitled  to  recover  anything  in  re- 
spect of  his  loan,  and  the  seller  of  the  good-will  shall  not  be 
entitled  to  recover  anything  in  respect  of  the  share  of  profits 
contracted  for,  until  the  claims  of  the  other  creditors  of  the 
borrower  or  buyer  for  valuable  consideration  in  money  or 
money's  worth  have  been  satisfied. 

4.  (1)  Persons  who  have  entered  into  partnership  with 
one  another  are  for  the  purposes  of  tjtiis  Act  called  collect- 
ively a  firm,  and  the  name  under  which  their  business  is 
carried  on  is  called  the  firm  name. 

(2)  In  Scotland  a  firm  is  a  legal  person  distinct  from  the 
partners  of  whom  it  is  composed,  but  an  individual  partner 
may  be  charged  on  a  decree  or  diligence  directed  against 
the  firm,  and  on  payment  of  the  debts  is  entitled  to  relief 
jpro  rata  from  the  firm  and  its  other  members. 

5.  Every  partner  is  an  agent  of  the  firm  and  Ins  other 
partners  for  the  purpose  of  the  business  of  the  partnership; 
and  the  acts  of  every  partner  who  docs  any  act  for  carry- 
ing on  in  the  usual  way  business  of  the  kind  cai-ried  on  by 
the  firm  of  which  he  is  a  member,  bind  the  firm  and  his 
partners,  unless  the  partner  so  acting  has  in  fact  no  author- 
ity to  act  for  the  firm  in  the  particular  matter,  and  the  per- 
son Avith  whom  ho  is  dealing  either  knows  that  he  has  no 
authority,  or  does  not  know  or  believe  him  to  bo  a  parln«'r. 

0.  An  act  or  instrument  relating  to  the  business  of  tljo 
firm  and  done  or  executed  in  the  firm  name,  oi-  in  any  other 

Sill 


APPENDIX   A. 

manner  showing  an  intention  to  bind  the  firm,  by  any  per- 
son thereto  authorized,  whether  a  partner  or  not,  is  binding 
on  the  firm  and  all  the  partners. 

Provided  that  this  section  shall  not  affect  any  general  rule 
of  law  relating  to  the  execution  of  deeds  or  negotiable  in- 
struments. 

7.  Where  one  partner  pledges  the  credit  of  the  firm  for  a 
purpose  apparently  not  connected  with  the  firm's  ordinary 
course  of  business  the  firm  is  not  bound,  unless  he  is  in  fact 
speciall}'  authorized  by  the  other  partners ;  but  this  section 
does  not  affect  any  personal  liability  incurred  by  an  individ- 
ual partner. 

8.  If  it  has  been  agreed  between  the  partners  that  any  re- 
striction shall  be  placed  on  the  power  of  any  one  or  more  of 
them  to  bind  the  firm,  no  act  done  in  contravention  of  the 
agreement  is  binding  on  the  firm  with  respect  to  persons 
having  notice  of  the  agreement. 

9.  Every  partner  in  a  firm  is  liable  jointly  with  the  other 
partners,  and  in  Scotland  severally  also,  for  all  debts  and  ob- 
ligations of  the  firm  incurred  while  he  is  a  partner;  and  after 
his  death  his  estate  is  also  severally  liable  in  a  due  course  of 
administration  for  such  debts  and  obligations,  so  far  as  they 
remain  unsatisfied,  but  subject  in  England  or  Ireland  to  the 
prior  payment  of  his  separate  debts. 

10.  Where,  by  any  wrongful  act  or  omission  of  any  part- 
ner acting  in  the  ordinary  course  of  the  business  of  the  firm, 
or  with  the  authority  of  his  copartners,  loss  or  injury  is 
caused  to  any  person  not  being  a  partner  in  the  firm,  or  any 
penalty  is  incurred,  the  firm  is  liable  therefor  to  the  same 
extent  as  the  partner  so  acting  or  omitting  to  act. 

11.  In  the  following  cases,  namely: 

(a)  Where  one  partner  acting  within  the  scope  of  his 
apparent  authority  receives  the  money  or  property  of  a 
third  person  and  misapplies  it ;  and 

(b)  Where  a  firm  in  the  course  of  its  business  receives 
money  or  property  of  a  third  person,  and  the  money  or 

212 


ENGLISH    PARTNERSHIP   ACT, 

property  so  receiyed  is  misapplied  by  one  or  more  of 
the  partners  while  it  is  in  the  custody  of  the  firm ; 
the  firm  is  liable  to  make  good  the  loss. 

12.  Every  partner  is  liable  jointly  with  his  copartners  and 
also  severally  for  everything  for  which  the  iirm  while  he  is 
a  partner  therein  becomes  liable  under  either  of  the  two 
last  preceding  sections. 

13.  If  a  partner,  being  a  trustee,  improperly  employs 
trust  property  in  the  business  or  on  the  account  of  the  part- 
nershi]),  no  other  partner  is  liable  for  the  trust  property  to 
the  persons  beneficially  interested  therein. 

Provided  as  follows: 

(1)  This  section  shall  not  affect  any  liability  incurred  by 
any  partner  by  reason  of  his  having  notice  of  a  breach  of 
trust;  and 

(2)  Nothing  in  this  section  shall  prevent  trust  money  from 
being  followed  and  recovered  from  the  firm  if  still  in  its 
possession  or  under  its  control. 

14.  (1)  Every  one  who  by  words  spoken  or  written  or  by 
conduct  represents  himself,  or  who  knowingly  suffers  him- 
self to  be  represented,  as  a  partner  in  a  particular  firm,  is 
liable  as  a  partner  to  any  one  who  has  on  the  faith  of  any 
such  representation  given  credit  to  the  firm,  whether  the 
representation  has  or  has  not  been  made  or  communicated 
to  the  person  so  giving  credit  by  or  with  the  knowledge  of 
the  apparent  partner  making  the  representation  or  suffering 
it  to  be  made. 

(2)  Provided  that  where  after  a  partner's  deatli  tJie  part- 
nership business  is  continued  in  the  old  firm  name,  the  con- 
tinued use  of  that  name  or  of  the  deceased  ])artncr's  name 
as  a  part  thereof  shall  not  of  itself  make  his  executors'  or 
administrators'  estate  or  effects  liable  for  any  partnership 
debts  contracted  after  his  death. 

15.  An  admission  or  representation  made  by  any  ])artnei- 
concerning  the  partnership  affairs,  and  in  the  ordinary  course 
of  its  business,  is  evidence  against  the  firm. 

213 


APPENDIX   A. 

16.  Notice  to  any  partner  who  habitually  acts  in  the 
partnership  business  of  any  matter  relating  to  partnership 
affairs  operates  as  notice  to  the  firm,  except  in  the  case  of  a 
fraud  on  the  firm  committed  by  or  with  the  consent  of  that 
partner. 

17.  (1)  A  person  who  is  admitted  as  a  partner  into  an 
existing  firm  does  not  thereby  become  liable  to  the  creditors 
of  the  firm  for  anything  done  before  he  became  a  partner. 

(2)  A  partner  who  retires  from  a  firm  does  not  thereby 
cease  to  be  liable  for  partnership  debts  or  obligations  in- 
curred before  his  retirement. 

(3)  A  retiring  partner  may  be  discharged  from  any  exist- 
ing liabilities  b}^  an  agreement  to  that  effect  between  him- 
self and  the  members  of  the  firm  as  newly  constituted  and 
the  creditors,  and  this  agreement  may  be  either  express  or  in- 
ferred as  a  fact  from  the  course  of  dealing  between  the  cred- 
itors and  the  firm  as  newly  constituted. 

18.  A  continuing  guaranty  or  cautionary  obligation  given 
either  to  a  firm  or  to  a  third  person  in  respect  of  the  trans- 
actions of  a  firm  is,  in  the  absence  of  agreement  to  the  con- 
trary, revoked  as  to  future  transactions  by  any  change  in 
the  constitution  of  the  firm  to  which,  or  of  the  firm  in  re- 
spect of  the  transactions  of  which,  the  guaranty  or  obliga- 
tion was  given. 

19.  The  mutual  rights  and  duties  of  partners,  whether 
ascertained  by  agreement  or  defined  by  this  Act,  may  be 
varied  by  the  consent  of  all  the  partners,  and  such  consent 
may  be  either  express  or  inferred  from  a  course  of  dealing. 

20.  (1)  All  property  and  rights  and  interests  in  property 
originally  brought  into  the  partnership  stock  or  acquired, 
whether  by  purchase  or  otherwise,  on  account  of  the  firm, 
or  for  the  purposes  and  in  the  course  of  the  partnership 
business,  are  called  in  this  Act  partnership  property,  and 
must  be  held  and  applied  by  the  partners  exclusively  for 
the  puvposes  of  the  partnership  and  in  accordance  with  the 
partnership  agreement. 

(2)  Provided  that  the  legal  estate  or  interest  in  an}^  land, 

214 


ENGLISH    PAETXEESHir    ACT. 

or  in  Scotland  the  title  to  and  interest  in  an}-  heritable  es- 
tate, which  belongs  to  the  partnership,  shall  devolve  accord- 
ing to  the  natnre  and  tenure  thereof,  and  the  general  rules 
of  law  thereto  applicable,  but  in  trust,  so  far  as  necessary, 
for  the  persons  benelicially  interested  in  the  land  under  this 
section. 

(3)  Where  co-owners  of  an  estate  or  interest  in  any  land, 
or  in  Scotland  in  any  heritable  estate,  not  being  itself  part- 
nership property,  are  partners  as  to  profits  made  by  the  use 
of  that  land  or  estate,  and  purchase  other  land  or  estate  out 
of  the  profits  to  be  used  in  like  manner,  the  land  or  estate 
so  purchased  belongs  to  them,  in  the  absence  of  an  agree- 
ment to  the  contrary,  not  as  partners,  but  as  co-owners  for 
the  same  respective  estates  and  interests  as  are  held  by  them 
in  the  land  or  estate  first  mentioned  at  the  date  of  the  pur- 
chase. 

21.  Unless  the  contrary  intention  appears,  property  bought 
with  money  belonging  to  the  firm  is  deemed  to  have  been 
bought  on  accotmt  of  the  firm. 

22.  Where  land  or  any  heritable  interest  therein  has  be- 
come partnership  property,  it  shall,  unless  the  contrary  in- 
tention appears,  be  treated  as  between  the  partners  (includ- 
ing the  representatives  of  a  deceased  partner),  and  also  as 
between  the  heirs  of  a  deceased  partner  and  his  executors  or 
administrators,  as  personal  or  movable,  and  not  real  or  herit- 
able estate. 

23.  (1)  After  the  commencement  of  this  Act,  a  Avrit  of 
execution  shall  not  issue  against  any  partnership  property, 
except  on  a  judgment  against  the  firm. 

(2)  The  high  court,  or  a  judge  thereof,  or  the  chancery 
court  of  the  county  palatine  of  Lancaster,  or  a  county  court, 
inay,  on  the  application  by  summons  of  any  judgment  creil- 
itor  of  a  partner,  make  an  order  charging  that  ])artner's 
interest  in  the  ])artnersliip  pro])erty  and  profits  with  pay- 
ment of  tli(}  amount  of  tlio  judgment  del)!  iitul  interest 
thereon,  and  nuiy  Ijy  the  same  or  a  suhsecpient  onh'r  ap- 
point a  receiver  of  that  partner's  share  of  profits  (whether 

215 


APPENDIX   A. 


already  declared  or  accruing),  and  of  any  other  money  which 
may  be  coming  to  him  in  respect  of  the  partnership,  and  di- 
rect all  accounts  and  inquiries,  and  give  all  other  orders  and 
directions  which  might  have  been  directed  or  given  if  the 
charge  had  been  made  in  favor  of  the  judgment  creditor  by 
the  partner,  or  which  the  circumstances  of  the  case  may  re- 
quire. 

(3)  The  other  partner  or  partners  shall  be  at  liberty  at 
any  time  to  redeem  the  interest  charged,  or,  in  case  of  a  sale 
being  directed,  to  purchase  the  same. 

(4)  This  section  shall  apply  in  the  case  of  a  cost-book  com- 
pany as  if  the  company  were  a  partnership  within  the  mean- 
ing of  this  Act, 

(5)  This  section  shall  not  apply  to  Scotland. 

24.  The  interests  of  partners  in  the  partnership  property 
and  their  rights  and  duties  in  relation  to  the  partnership 
shall  be  determined,  subject  to  any  agreement,  express  or 
implied,  between  the  partners,  by  the  following  rules: 

(1)  All  the  partners  are  entitled  to  share  equally  in  the 
capital  and  profits  of  the  business,  and  must  contribute 
equally  towards  the  losses,  whether  of  capital  or  otherwise, 
sustained  by  the  firm. 

(2)  The  firm  must  indemnify  every  partner  in  respect  of 
payments  made  and  personal  liabilities  incurred  by  him  — 

(a)  In  the  ordinary  and  proper  conduct  of  the  busi- 
ness of  the  firm ;  or, 

(b)  In  or  about  anything   necessarily  done  for  the 
preservation  of  the  business  or  property  of  the  firm. 

(3)  A  partner  making,  for  the  purpose  of  the  partnership, 
any  actual  payment  or  advance  beyond  the  amount  of  capi- 
tal which  he  has  agreed  to  subscribe,  is  entitled  to  interest 
at  the  rate  of  five  per  cent,  per  annum  from  the  date  of  the 
payment  or  advance. 

(4)  A  partner  is  not  entitled,  before  the  ascertainment  of 
profits,  to  interest  on  the  capital  subscribed  by  him. 

(5)  Every  partner  may  take  part  in  the  management  of 
the  partnership  business. 

316 


lEXGLISH    PARTNKRSTTTF  ACT. 

(C)  Ko  partner  shall  be  entitled  to  remuneration  for  act- 
ing in  the  partnership  business. 

(7)  Xo  person  may  be  introduced  as  a  partner  without  the 
consent  of  all  existing  partners. 

(S)  An}"  difference  arising  as  to  ordinary  matters  con- 
nected with  the  partnership  business  may  be  decided  by  a 
majority  of  the  partners,  but  no  change  may  be  made  in 
the  nature  of  the  partnership  business  without  the  consent 
of  all  existing  partners, 

(9)  The  partnership  books  are  to  be  kept  at  the  place  of 
business  of  the  partnership  (or  the  principal  place,  if  there 
is  more  than  one),  and  every  partner  may,  when  he  thinks 
fit,  have  access  to  and  inspect  and  copy  any  of  them. 

25.  ]Sro  majority  of  the  partners  can  expel  any  partner 
unless  a  power  to  do  so  has  been  conferred  by  express  agree- 
ment between  the  partners. 

26.  (1)  Where  no  fixed  term  has  been  agreed  upon  for 
the  duration  of  the  partnership,  any  partner  may  determine 
the  partnership  at  any  time  on  giving  notice  of  his  inten- 
tion so  to  do  to  all  the  other  partners. 

(2)  "Where  the  partnership  has  originally  been  constituted 
by  deed,  a  notice  in  writing,  signed  by  the  partner  giving 
it,  shall  be  sufficient  for  this  purpose. 

27.  (1)  Where  a  partnership  entered  into  for  a  fixed  term 
is  continued  after  the  term  has  expired,  and  without  any  ex- 
press new  agreement,  the  rights  and  duties  of  the  partners 
remain  the  same  as  they  were  at  the  expiration  of  the  term, 
so  far  as  is  consistent  with  the  incidents  of  a  partnership  at 
will. 

(2)  A  continuance  of  the  business  by  the  partners  or  such 
of  them  as  habitually  acted  therein  during  the  term,  with- 
out any  settlement  or  ]i(juidation  of  the  partnci-ship  atlairs, 
is  presumed  to  be  a  continuance  of  the  [)artnorship. 

28.  Partners  are  bound  to  render  true  accounts  and  lull 
information  of  all  things  affecting  the  partnership  to  any 
partner  or  his  legal  representatives. 

317 


APPENDIX   A. 

29.  (1)  Every  partner  must  account  to  the  firm  for  any 
benefit  derived  by  him  without  the  consent  of  the  other 
partners  from  any  transaction  concerning  the  partnership, 
or  from  any  use  by  him  of  the  partnership  property,  name 
or  business  connection. 

(2)  This  section  applies  also  to  transactions  undertaken 
after  a  partnership  has  been  dissolved  by  the  death  of  a  part- 
ner, and  before  the  affairs  thereof  have  been  completely 
wound  up,  either  by  any  surviying  partner  or  by  the  rep- 
resentatives of  the  deceased  partner. 

30.  If  a  partner,  without  the  consent  of  the  other  part- 
ners, carries  on  any  business  of  the  same  nature  as  and  com- 
peting with  that  of  the  firm,  he  must  account  for  and  pay 
over  to  the  firm  all  profits  made  by  him  in  that  business. 

31.  (1)  An  assignment  by  any  partner  of  his  share  in  the 
partnership,  either  absolute  or  by  w^ay  of  mortgage  or  re- 
deemable charge,  does  not,  as  against  the  other  partners, 
entitle  the  assignee,  during  the  continuance  of  the  partner- 
ship, to  interfere  in  the  management  or  administration  of 
the  partnership  business  or  affairs,  or  to  require  any  ac- 
counts of  the  partnership  transactions,  or  to  inspect  the 
partnership  books,  but  entitles  the  assignee  only  to  receive 
the  share  of  profits  to  which  the  assigning  partner  would 
otherwise  be  entitled,  and  the  assignee  must  accept  the  ac- 
count, of  profits  agreed  to  by  the  partners. 

(2)  In  case  of  a  dissolution  of  the  partnership,  whether  as 
respects  all  the  partners  or  as  respects  the  assigning  part- 
ner, the  assignee  is  entitled  to  receive  the  share  of  the  part- 
nership assets  to  which  Hhe  assigning  partner  is  entitled  as 
between  himself  and  the  other  partners,  and,  for  the  pur- 
pose of  ascertaining  that  share,  to  an  account  as  from  the 
date  of  the  dissolution. 

32.  Subject  to  any  agreement  between  the  partners,  a 
partnership  is  dissolved  — 

(a)  If  entered  into  for  a  fixed  term,  by  the  expiration 
of  that  term. 

218 


ENGLISH    PARTNERSHIP    ACT. 

(b)  If  entered  into  for  a  siugle  adventure  or  under- 
taking, by  the  termination  of  that  adventure  or  under- 
taking. 

(c)  If  entered  into  for  an  undefined  time,  by  any  part- 
ner giving  notice  to  the  other  or  others  of  his  intention 
to  dissolve  the  partnership. 

In  the  last-mentioned  case  the  partnership  is  dissolved  as 
from  the  date  mentioned  in  the  notice  as  the  date  of  disso- 
lution, or,  if  no  date  is  so  mentioned,  as  from  the  date  of  the 
communication  of  the  notice. 

33.  (1)  Subject  to  any  agreement  bet\veen  the  partners, 
every  partnership  is  dissolved  as  regards  all  the  partners  by 
the  death  or  bankruptcy  of  any  partner. 

(2)  A  partnership  may,  at  the  option  of  the  other  part- 
ners, be  dissolved  if  any  partner  suffers  his  share  of  the  part- 
nership property  to  be  charged  under  this  Act  for  his  sepa- 
rate debt. 

34-,  A  partnership  is  in  every  case  dissolved  by  the  hap- 
pening of  any  event  which  makes  it  unlawful  for  the  busi- 
ness of  the  firm  to  be  carried  on  or  for  the  members  of  the 
firm  to  carry  it  on  in  partnership. 

35.  On  application  by  a  partner  the  court  may  decree  a 
dissolution  of  the  partnership  in  any  of  the  following  cases : 

(a)  When  a  partner  is  found  lunatic  b}^  inquisition,  or 
in  Scotland  by  cognition,  or  is  shown  to  the  satisfaction 
of  the  court  to  be  of  permanently  unsound  mind,  in 
either  of  which  cases  the  application  may  be  made  as 
well  on  behalf  of  that  partner  by  his  committee  or  next 
friend  or  person  having  title  to  intervene  as  by  any 
other  partner. 

(b)  When  a  partner,  other  than  the  partner  suing, 
becomes  in  any  other  way  permanently  incapabK;  of 
performing  his  part  of  the  partnership  contract. 

(c)  When  a  partner,  othc  than  the  partner  suing,  has 
been  guilty  of  such  conduct  as,  in  the  oi)inion  of  the 
court,  regard  being  had  to  the  nature  of  the  business,  is 

21'J 


APPENDIX  A.  • 

calculated  to  prejudicially  affect  the  carrying  on  of  the 
business. 

(d)  When  a  partner,  other  than  the  partner  suing, 
wilfully  or  persistently  commits  a  breach  of  the  part- 
nership agreement,  or  otherwise  so  conducts  himself  in 
matters  relating  to  the  partnership  business  that  it  is 
not  reasonably  practicable  for  the  other  partner  or  par- 
ners  to  carry  on  the  business  in  partnership  with  him. 

(e)  When  the  business  of  the  partnership  can  only  be 
carried  on  at  a  loss. 

(f)  Whenever  in  any  case  circumstances  have  arisen 
which  in  the  opinion  of  the  court  render  it  just  and 
equitable  that  the  partnership  be  dissolved. 

36.  (1)  Where  a  person  deals  with  a  firm  after  a  change 
in  its  constitution,  he  is  entitled  to  treat  all  apparent  mem- 
bers of  the  old  firm  as  still  being  members  of  the  firm  until 
he  has  notice  of  the  change. 

(2)  An  advertisement  in  the  London  Gazette  as  to  a  firm 
whose  principal  place  of  business  is  in  England  or  Wales ;  in 
the  Edinburgh  Grazette  as  to  a  firm  whose  principal  place  of 
business  is  in  Scotland,  and  in  the  Dublin  Gazette  as  to  a 
firm  whose  principal  place  of  business  is  in  Ireland,  shall  be 
notice  as  to  persons  who  had  not  dealings  with  the  firm 
before  the  date  of  the  dissolution  or  change  so  advertised. 

(3)  The  estate  of  a  partner  who  dies,  or  who  becomes 
bankrupt,  or  of  a  partner  who,  not  having  been  known  to 
the  person  dealing  with  the  firm  to  be  a  partner,  retires 
from  the  firm,  is  not  liable  for  partnership  debts  contracted 
after  the  date  of  the  death,  bankruptcy  or  retirement  re- 
spectively. 

37.  On  the  dissolution  of  a  partnership  or  retirement  of  a 
partner,  any  partner  may  publicly  notify  the  same,  and  may 
require  the  other  partner  or  partners  to  concur  for  that  pur- 
pose  in  all  necessary  or  proper  acts,  if  any,  which  cannot  be 
done  without  his  or  their  concurrence. 

38.  After  the  dissolution  of  a  partnership,  the  authority 
of  each  partner  to  bind  the  firm,  and  the  other  rights  and 

330 


ENGLISH    PARTNERSHIP   ACT. 

obligations  of  the  partners,  continue  notwithstanding  the 
dissolution  so  far  as  may  be  necessary  to  wind  up  the  affairs 
of  the  partnership,  and  to  complete  transactions  begun  but 
unfinished  at  the  time  of  the  dissolution,  but  not  otherwise. 
Provided  that  the  firm  is  in  no  case  bound  by  the  acts  of 
a  partner  who  has  become  bankrupt ;  but  this  proviso  does 
not  affect  the  liability  of  any  person  who  has,  after  the 
bankruptcy,  represented  himself,  or  knowingly  suffered  him- 
self to  be  represented,  as  a  partner  of  the  bankrupt. 

39.  On  the  dissolution  of  a  partnership  every  partner  is 
entitled,  as  against  the  other  partners  in  the  firm,  and  all 
persons  claiming  through  them  in  respect  of  their  interests 
as  partners,  to  have  the  property  of  the  partnership  applied 
in  payment  of  the  debts  and  liabilities  of  the  firm,  and  to 
have  the  surplus  assets  after  such  payment  applied  in  pay- 
ment of  what  may  be  due  to  the  partners  respectively  after 
deducting  what  may  be  due  from  them  as  partners  to  the  firm ; 
and  for  that  purpose  any  partner  or  his  representatives  may 
on  the  termination  of  the  partnership  apply  to  the  court  to 
wind  up  the  business  and  affairs  of  the  firm. 

40.  Where  one  partner  has  paid  a  premium  to  another  on 
entering  into  a  partnership  for  a  fixed  term,  and  the  part- 
nership is  dissolved  before  the  expiration  of  that  term  other- 
wise than  by  the  death  of  a  partner,  the  court  may  order 
the  repayment  of  the  premium,  or  of  such  part  thereof  as  it 
thinks  just,  having  regard  to  the  terms  of  the  partnership 
contract  and  to  the  length  of  time  during  which  the  part- 
nership has  continued ;  unless 

(a)  The  dissolution  is,  in  the  judgment  of  the  court, 
wholly  or  chieliy  due  to  the  misconduct  of  the  partner 
who  paid  the  premium,  or 

(b)  The  partnership  has  been  dissolved  by  an  agree- 
ment containing  no  provision  for  a  return  of  any  part  of 
the  premium. 

41.  "Where  a  partnership  contract  is  rescinded  on  the 
ground  of  the  fraud  or  misrepresentation  of  on©  of  the  par- 

221 


APPENDIX   A. 

ties  thereto,  the  party  entitled  to  rescind  is,  without  preju- 
dice to  any  other  right,  entitled  — 

(a)  to  a  lien  on,  or  right  of  retention  of,  the  surplus  of 
the  partnership  assets,  after  satisfying  the  partnership 
liabilities,  for  any  sum  of  money  paid  by  him  for  the 
purchase  of  a  share  in  the  partnership,  and  for  any 
capital  contributed  by  him,  and  is 

(b)  to  stand  in  the  place  of  the  creditors  of  the  firm 
for  any  payments  made  by  him  in  respect  of  the  part- 
nership liabilities,  and 

(c)  to  be  indemnified  by  the  person  guilty  of  the  fraud 
or  making  the  representation  against  all  the  debts  and 
liabilities  of  the  firm. 

42.  (1)  Where  any  member  of  a  firm  has  died  or  other- 
wise ceased  to  be  a  partner,  and  the  surviving  or  continuing 
partners  carry  on  the  business  of  the  firm  with  its  ca]ntal 
or  assets  without  any  final  settlement  of  accounts  as  between 
the  firm  and  the  outgoing  partner  or  his  estate,  then,  in  the 
absence  of  any  agreement  to  the  contrary,  the  outgoing  part- 
ner or  his  estate  is  entitled  at  the  option  of  himself  or  his 
representatives  to  such  share  of  the  profits  made  since  the 
dissolution  as  the  court  may  find  to  be  attributable  to  the 
use  of  his  share  of  the  partnership  assets,  or  to  interest  at 
the  rate  of  five  per  cent,  per  annum  on  the  amount  of  his 
share  of  the  partnership  assets. 

(2)  Provided  that  where  by  the  partnership  contract  an 
option  is  given  to  surviving  or  continuing  partners  to  pur- 
chase the  interest  of  a  deceased  or  outgoing  partner,  and 
that  option  is  duly  exercised,  the  estate  of  the  deceased  part- 
ner, or  the  outgoing  partner  or  his  estate,  as  the  case  may 
be,  is  not  entitled  to  any  further  or  other  share  of  prof- 
its; but  if  any  partner  assuming  to  act  in  exercise  of  the 
option  does  not  in  all  material  respects  comply  with  the 
terms  thereof,  he  is  liable  to  account  under  the  foregoing- 
provisions  of  this  section. 

43.  Subject  to  any  agreement  between  the  partners,  the 
amount  due  from  surviving  or  continuing  partners  to  an  out- 

222 


ENGLISH   PARTNERSHIP    ACT. 

going  partner  or  the  representatives  of  a  deceased  partner 
in  respect  of  the  outgoing  or  deceased  partner's  share  is  a 
debt  accruing  at  the  date  of  the  dissohition  or  death. 

•i-A.  In  settling  accounts  between  the  partners  after  a  dis- 
sohition  of  partnership,  the  following  rules  shall,  subject  to 
an}''  agreement,  be  observed: 

(a)  Losses,  including  losses  and  deficiencies  of  capital, 
shall  be  paid  first  out  of  profits,  next  out  of  capital,  and 
lastly,  if  necessary,  by  the  partners  individually  in  the 
proportion  in  which  they  were  entitled  to  share  profits. 

(b)  The  assets  of  the  firm,  including  the  sums,  if  any, 
contributed  b}^  the  partners  to  make  up  losses  or  de- 
ficiencies of  capital,  shall  be  applied  in  the  following 
manner  and  order : 

(1)  In  paying  the  debts  and  liabilities  of  the  firm 
to  persons  who  are  not  partners  therein. 

(2)  In  paying  to  each  partner,  ratably,  what  is 
due  from  the  firm  to  him  for  advances  as  distin- 
guished from  capital. 

(3)  In  paying  to  each  partner,  ratably,  what  is 
due  from  the  firm  to  him  in  respect  of  capital. 

(•I)  The  ultimate  residue,  if  any,  shall  be  divided 
among  the  partners  in  the  proportion  in  which 
profits  are  divisible. 

45.  In  this  Act,  unless  the  contrary  intention  appears  — 
The  expression  "court"  includes  every  court  and  judge 

having  jurisdiction  in  the  case. 

The  expression  "  business  "  includes  every  trade,  occupa- 
tion or  profession. 

46.  The  rules  of  equity  and  of  common  law  a[)i)licablo  to 
partnership  shall  continue  in  force  except  so  far  as  they  are 
inconsistent  with  the  exjiress  provisions  of  this  Act. 

47.  (1)  In  the  application  of  this  Act  to  Scothuid  the 
bankruptcy  of  a  firm  or  of  an  individual  shall  mean  seques- 
tration under  the  Bankruptcy  (Scotland)  Acts,  and  also  in 
the  case  of  an  individual  the  issue  against  him  of  a  degree  of 

068810  hoiK/ruia. 

223 


APPENDIX   A. 

(2)  Nothing  in  this  Act  shall  alter  the  rules  of  the  law  of 
Scotland  relating  to  the  bankruptcy  of  a  firm  or  of  the  in- 
dividual partners  thereof. 

48.  The  Acts  mentioned  in  the  schedule  to  this  Act  are 
hereby  repealed  to  the  extent  mentioned  in  the  third  column 
of  that  schedule. 

49.  This  Act  shall  come  into  operation  on  the  first  day  of 
January,  one  thousand  eight  hundred  and  ninety-one. 

50.  This  Act  may  be  cited  as  the  Partnership  Act,  1890. 

S24 


AMERICAN  CODES. 

The  following  are  the  sections  of  the  California  code 
upon  the  subject  of  Partnership.  It  has  been  re-enacted  in 
Dakota  and  Montana  with  such  variations  as  are  noted. 

Article  I. 

WHAT   CONSTITUTES    A    PARTNERSHIP. 

Sec  2395.  Partnership  is  the  association  of  two  or  more 
persons  for  the  purpose  of  carrying  on  business  together,  and 
dividing  its  profits  between  them. 

Sec  2396.  Part  owners  of  a  ship  do  not,  by  simply  using 
it  in  a  joint  enterprise,  become  partners  as  to  the  ship. 
(Not  in  Montana  statutes.) 

Sec  2397.  A  partnership  can  be  founded  only  by  the 
consent  of  all  the  parties  thereto,  and  therefore  no  new  part- 
ner can  be  admitted  to  the  partnership  without  the  consent 
of  every  existing  member  thereof. 

Article  II. 
partnership  property. 

Sec  2401.  The  property  of  a  partnership  consists  of  all 
that  is  contributed  to  the  common  stock  at  the  formation 
of  the  partnership,  and  all  that  is  subsc(|uently  acquired 
thereby. 

Skc.  2402.  The  interest  of  each  memljor  of  a  partnership 
extends  to  every  portion  of  its  property. 

Sec  2403,  In  the  absence  of  any  agreement  on  the  sub 
ject,  the  shares'of  j)artners  in  the  ))roIit  or  loss  of  tiie  busi- 
ness are  equal,  and  the  share  of  each  in  the  partnerslii)) 

15  225 


APPENDIX   A. 

property  is  the  value  of  his  original  contribution,  increased 
or  diminished  by  his  share  of  profit  or  loss. 

Sec.  2404.  An  agreement  to  divide  the  profits  of  a  busi- 
ness implies  an  agreement  for  a  corresponding  division  of 
its  losses,  unless  it  is  otherwise  expressly  stipulated. 

Sec.  2405.  Each  member  of  a  partnership  may  require 
its  property  to  be  applied  to  the  discharge  of  its  debts,  and 
has  a  lien  upon  the  shares  of  the  other  partners  for  this  pur- 
pose, and  for  the  payment  of  the  general  balance,  if  any, 
due  to  him. 

Sec.  2406.  Property,  whether  real  or  personal,  acquired 
with  partnership  funds,  is  presumed  to  be  partnership  prop- 
erty. 

Article  III. 

MUTUAL    OBLIGATIONS    OF   PARTNERS. 

Sec  2410.  The  relations  of  partners  are  confidential. 
They  are  trustees  for  each  other  within  the  meaning  of 
chapter  I  of  the  title  on  trusts,  and  their  obligations  as  such 
trustees  are  defined  by  that  chapter. 

Sec.  2411.  In  all  proceedings  connected  with  the  forma- 
tion, conduct,  dissolution  and  liquidation  of  a  partnership, 
every  partner  is  bound  to  act  in  the  highest  good  faith  to- 
ward his  copartners.  He  may  not  obtain  any  advantage 
over  them  in  the  partnership  affairs  by  the  slightest  mis- 
representation, concealment,  threat  or  adverse  pressure  of 
any  kind. 

Sec.  2412.  Each  member  of  a  partnership  must  account 
to  it  for  everything  that  he  receives  on  account  thereof,  and 
is  entitled  to  reimbursement  therefrom  for  everything  that 
he  properly  expends  for  the  benefit  thereof,  and  to  be  in- 
demnified thereby  for  all  losses  and  risks  which  he  neces- 
sarily incurs  on.  its  behalf. 

Sec  2413.  A  partner  is  not  entitled  to  any  compensation 
for  services  rendered  by  him  to  the  partnership.  (In  Mon- 
tana statutes  the  following  is  added:  —  "unless  there  is  an 
agreement  to  that  effect") 

226 


american  codes. 

Article  IY. 

rexrxciatiox  of  partnership. 

Sec.  2-417.  A  partner  may  exonerate  himself  from  all 
future  liability  to  a  third  person  on  account  of  the  partner- 
ship by  renouncing  in  good  faith  all  participation  in  its  future 
profits,  and  giving-  notice  to  such  third  person  and  to  his 
own  copartners  that  he  has  made  such  renunciation,  and 
that  so  far  as  may  be  in  his  power  he  dissolves  the  partner- 
ship and  does  not  intend  to  be  liable  on  account  thereof  for 
the  future. 

Sec  2418.  After  a  partner  has  given  notice  of  his  renun- 
ciation of  the  partnership  he  cannot  claim  any  of  its  subse- 
quent profits,  and  his  copartners  may  proceed  to  dissolve 
the  partnership. 

CHAPTER  II. 
Article  I. 

WHAT   IS   A  GENERAL   PARTNERSHIP. 

Sec  2424.  Every  partnership  that  is  now  formed  in  ac- 
cordance  Avith  the  law  concerning  special  or  mining  partner- 
ships, and  every  special  partnership  so  far  only  as  the  gen- 
eral partners  are  concerned,  is  a  general  partnership. 

Article  II. 

powers  and  authority  of  partners. 

Sec  2428.  Unless  otherwise  expressly  stipulated,  the  de- 
cision of  the  majority  of  the  members  of  a  general  j)artner- 
ship  binds  it  in  the  conduct  of  its  business. 

Sec.  2420.  Every  general  partner  is  agent  for  the  ]r,\v\- 
nership  in  the  transaction  of  its  business,  and  has  authority 
to  do  whatever  is  necessary  to  carry  on  such  business  in  the 
ordinary  manner,  and  for  this  ])urpose  may  bind  his  copart- 
ners by  an  agreement  in  writing. 

227 


APPENDIX    A. 

Sec.  2430.  A  partner,  as  such,  has  not  authority  to  do 
any  of  the  following  acts,  unless  his  partners  have  wholly 
abandoned  the  business  to  him,  or  are  incapable  of  acting: 

1.  To  make  an  assignment  of  the  partnership  property  or 
any  portion  thereof  to  a  creditor,  or  to  a  third  person  in 
trust  for  the  benefit  of  a  creditor  or  of  all  creditors. 

2.  To  dispose  of  the  good-will  of  the  business. 

3.  To  dispose  of  the  whole  of  the  partnership  property  at 
once,  unless  it  consists  entirely  of  merchandise.  (The  ital- 
icised part  of  last  clause  is  not  in  the  Montana  statute.) 

4.  To  do  any  act  which  would  make  it  impossible  to  carry 
on  the  ordinary  business  of  the  partnership. 

5.  To  confess  a  judgment. 

6.  To  submit  a  partnership  claim  to  arbitration. 

7.  To  do  any  other  act  not  within  the  scope  of  the  preced- 
ing section. 

Sec.  2431.  A  partner  is  not  bound  by  any  act  of  a  co- 
partner in  bad  faith  toward  him,  though  within  the  scope 
of  the  partner's  powers,  except  in  favor  of  persons  who  have 
in  good  faith  parted  with  value  in  reliance  upon  such  act. 

Article  III. 

MUTUAL   OBLIGATIONS    OF    PARTNERS. 

Sec.  2435.  All  profits  made  by  a  general  partnership,  in 
the  course  of  any  business  usually  carried  on  by  the  part- 
nership, belong  to  the  firm. 

Sec.  2436.  A  general  partner,  who  agrees  to  give  his  per- 
sonal attention  to  the  business  of  the  partnership,  may  not 
engage  in  any  business  which  gives  him  an  interest  adverse 
to  that  of  the  partnership,  or  which  prevents  him  from  giv- 
ing to  such  business  all  the  attention  which  would  be  ad- 
vantageous to  it. 

Sec.  2437.  A  partner  may  engage  in  any  separate  busi- 
ness, except  as  otherwise  provided  by  the  last  two  sections. 

Sec.  2438.  A  general  partner  transacting  business  con- 
trary to  the  provisions  of  this  article  may  be  required  by 

228 


AMERICAN   CODES. 

any  copartner  to  account  to  the  partnership  ioY  the  profits 
of  such  business. 

Article  IY. 
liabilities  of  partners. 

Sec.  24:12.  Every  general  partner  is  liable  to  third  per- 
sons for  all  the  obligations  of  the  partnership,  jointly  with 
his  copartners. 

Sec.  2i-t3.  The  liability  of  general  partners  for  eacli 
othei-'s  acts  is  defined  by  the  title  on  agency. 

Sec.  2444.  Any  one  permitting  himself  to  be  represented 
as  a  partner,  general  or  special,  is  liable,  as  such,  to  third 
persons  to  whom  such  representation  is  communicated,  and 
who,  on  the  faith  thereof,  give  credit  to  the  partnership. 

Sec.  2445.  No  one  is  liable  as  a  partner  who  is  not  such 
in  fact,  except  as  provided  in  the  last  section. 

Article  V, 

TERMINATION    OF  PARTNERSHIP. 

Sec.  2449.  If  no  term  is  prescribed  by  agreement  for  its 
duration,  a  general  partnership  continues  until  dissolved  by 
a  partner  or  by  operation  of  law. 

Sec.  2450.  A  general  partnership  is  dissolved  as  to  all 
the  partners: 

1.  By  lapse  of  the  time  prescribed  by  agreement  for  its 
duration. 

2.  By  the  expressed  Avill  of  any  partner,  if  there  is  no 
such  agreement. 

3.  By  the  death  of  a  partner. 

4.  By  a  transfer  to  a  person,  not  a  ]iai'tU(M-,  of  tho  inter- 
est of  any  partner  in  tho  partnership  i)ro[)orty, 

5.  By  war,  or  the  prohibition  of  commercial  iutcrconisc 
between  tho  country  in  which  one  partner  resides  and  thai 
in  which  another  resides;  or, 

G.  By  a  judgment  of  dissolution. 

229 


APPENDIX   A. 


Sec.  2451.  A  general  partnership  may  be  dissolved,  as  to 
himself  only,  by  the  expressed  will  of  any  partner,  notwith- 
standing his  agreement  for  its  continuance ;  subject,  how- 
ever, to  liability  to  his  copartners  for  any  damage  caused  to 
them  thereby,  unless  the  circumstances  are  such  as  entitle 
him  to  a  judgment  of  dissolution. 

Sec.  2453.  A  general  partner  is  entitled  to  a  judgment  of 
dissolution : 

1.  When  he,  or  another  partner,  becomes  legally  incapa- 
ble of  contracting. 

2.  When  another  partner  fails  to  perform  his  duties  under 
the  agreement  of  partnership,  or  is  guilty  of  serious  miscon- 
duct; or, 

3.  When  the  business  of  the  partnership  can  be  carried  on 
only  by  a  permanent  loss. 

Sec.  2453.  The  liability  of  a  general  partner  for  the  acts 
of  his  copartners  continues,  even  after  a  dissolution  of  the 
copartnership,  in  favor  of  persons  who  have  had  dealings 
with  and  given  credit  to  the  partnership  during  its  exist- 
ence, until  they  have  had  personal  notice  of  the  dissolution; 
and  in  favor  of  other  persons  until  such  dissolution  has  been 
advertised  in  a  newspaper  published  in  every  county  where 
the  partnership,  at  the  time  of  its  dissolution,  had  a  place  of 
business,  if  a  newspaper  is  there  published,  to  the  extent  in 
either  case  to  which  such  persons  part  with  value  in  good 
faith,  and  in  the  belief  that  such  partner  is  still  a  member 
of  the  firm. 

Sec.  2454.  A  change  of  the  partnership  name,  which 
plainly  indicates  the  withdrawal  of  a  partner,  is  sufficient 
notice  of  the  fact  of  such  withdrawal  to  all  persons  to  whom 
it  is  communicated ;  but  a  change  in  the  name,  which  does 
not  contain  such  an  indication,  is  not  notice  of  the  with- 
drawal of  any  partner. 

230 


amekican  codes. 

Article  YI. 
liquidation". 

Sec.  2458.  After  the  dissolution  of  a  partnership,  the 
powers  and  authority  of  the  partners  are  such  only  as  are 
prescribed  by  this  article. 

Sec.  2459.  Any  member  of  a  general  partnership  may  act 
in  liquidation  of  its  affairs,  except  as  provided  by  the  next 
section. 

Sec.  2460.  If  the  liquidation  of  a  partnership,  is  commit- 
ted, by  consent  of  all  the  partners,  to  one  or  more  of  them, 
the  others  have  no  right  to  act  therein ;  but  their  acts  are 
valid  in  favor  of  persons  parting  with  value,  in  good  faith, 
upon  credit  thereof. 

Sec  2461.  A  partner  authorized  to  act  in  liquidation  may 
collect,  compromise  or  release  any  debts  due  to  the  partner- 
ship, pay  or  compromise  any  claims  against  it,  and  dispose 
of  partnership  property. 

Sec  2462.  A  partner  authorized  to  act  in  liquidation  may 
indorse,  in  the  name  of  the  firm,  promissory  notes,  or  other 
obligations  held  by  the  partnership,  for  the  purpose  of  col- 
lecting the  same,  but  he  cannot  create  any  new  obligation 
in  its  name,  or  revive  a  debt  against  the  firm,  by  an  ac- 
knowledgment, when  an  action  thereon  is  barred  under  the 
provisioDs  of  the  code  of  civil  procedure. 

Article  VII. 

or  tue  use  of  fictitious  navvies. 

Sec  2466.  Ki.cept  as  otherwise  provided  in  the  next  section^ 
every  partnershij)  transacting  business  in  this  state  under  a 
fictitious  name,  or  a  designation  not  showing  the  names  of 
the  persons  interested  as  partners  in  such  l)nsiness,  must  file 
with  tha  clerk  of  the  county  in  whicli  its  principal  phico  of 
lousiness  is  situated  a  certificate  stating  the  names  in  full  of 

231 


APPENDIX    A. 


all  the  members  of  such  partnershijD  and  their  places  of  resi. 
deuce,  and  publish  the  same  once  a  week  for  four  successive 
weeks,  in  a  newspaper  published  in  the  county,  if  there  be 
one,  and  if  there  be  none,  in  such  county,  then  in  a  news- 
paper published  in  an  adjoining  county.  (In  Montana  stat- 
ute the  preceding  italicised  clause  and  section  2J:G7  are 
omitted.) 

Sec.  2467.  A  commercial  or  banking  partnership,  estab- 
lished and  transacting  business  in  a  place  without  the  United 
States,  ma}^,  without  filing  the  certificate,  or  making  the 
publication  prescribed  in  the  last  section,  use  in  this  state 
the  partnership  name  used  by  it  there,  although  it  be  ficti- 
tious, or  does  not  show  the  names  of  the  persons  interested 
as  partners  in  such  business. 

Sec.  2468.  The  certificate  filed  with  the  clerk,  as  provided 
in  section  2466,  must  be  signed  by  the  ]iartners,  and  ac- 
knowledged before  some  officer  authorized  to  take  the  ac- 
knowledgment of  conveyances  of  real  property.  Where  the 
partnership  is  hereafter  formed,  the  certificate  must  be  filed, 
and  the  publication  designated  in  that  section  must  be  made 
within  one  month  after  the  formation  of  the  partnership,  or 
within  one  month  from  the  time  designated  in  the  agree- 
ment of  its  members  for  the  commencement  of  the  partner- 
ship ;  where  the  partnership  has  been  heretofore  formed,  the 
certificate  must  be  filed  and  the  publication  made  within  six 
months  after  the  passage  of  this  act.  Persons  doing  busi- 
ness as  partners  contrary  to  the  provision  of  this  article 
shall  not  maintain  any  action  upon  or  on  account  of  any 
contracts  made  or  transactions  had  in  their  partnershi]) 
name,  in  any  court  in  this  state,  until  they  have  first  filed 
the  certificate  and  made  the  publication  herein  required. 

Sec  2469.  On  every  change  in  the  members  of  a  partner- 
ship transacting  business  in  this  state  under  a  fictitious 
name,  or  a  designation  w^hich  does  not  show  the  names  of 
the  persons  interested  as  partners  in  its  business,  except  in 
the  case  mentioned  in  section  2467,  a  new  certificate  must 

233 


AMERICAN   C0T5ES. 

be  filed  with  tlie  county  clerk,  and  a  new  publication  made, 
as  required  by  this  article  on  the  formation  of  such  partner- 
ship. 

Sec.  2470.  Every  county  clerk  must  keep  a  register  of  the 
names  of  firms  and  persons  mentioned  in  the  certificates 
filed  with  him,  pursuant  to  this  article,  entering  in  alpha- 
betical order  the  name  of  every  such  partnership,  and  of 
each  partner  therein. 

Sec  2J:71.  Copies  of  the  entries  of  a  county  clerk,  as 
herein  directed,  Avhen  certified  by  him,  and  affidavits  of  publi- 
cation, as  herein  directed,  made  by  the  printer,  publisher  or 
chief  clerk  of  a  newspaper,  are  presumptive  evidence  of  the 
facts  therein  stated. 


CHAPTER  III. 

SPECIAL  PARTNERSHIP. 
Article  I. 

FOKMATION    OF    PARTNERSHIP. 

Sec.  2477.  A  special  partnership  may  be  formed  by  two 
or  more  persons,  in  the  manner  and  with  the  effect  ])re- 
scribed  in  this  chapter,  for  the  transaction  of  any  business 
except  banking  or  insurance. 

Sec  2478.  A  special  partnership  may  consist  of  one  or 
more  persons  called  general  partners,  and  one  or  more  i)er- 
sons  called  special  partners. 

Sec  2470.  Persons  desirous  of  forming  a  special  partnoi-- 
ship  must  severally  sign  a  certificate,  stating: 

1.  The  name  under  whicli  the  partnership  is  to  bo  con- 
d  icted. 

2.  The  general  nature  of  the  business  intended  to  l)o  tians- 
acted. 

3.  The  names  of  all  the  pai'tnci's  and  llu^ir  residences,  sj)eci- 
fying  which  are  general  and  uhicli  are  special  j)artners. 

233 


APPENDIX    A. 

4.  The  amount  of  capital  which  each  special  partner  has 
contributed  to  the  common  stock. 

5.  The  periods  at  which  such  partnership  will  begin  and 
end. 

Sec.  2480.  Certificates  under  the  last  section  must  be  ac- 
knowledged by  all  the  partners  before  some  officer  authorized 
to  take  acknowledgment  of  deeds;  one  to  be  filed  in  the 
clerk's  office,  and  the  other  recorded  in  the  office  of  the  re- 
corder of  the  county  in  which  the  principal  place  of  business 
of  the  partnership  is  situated,  in  a  book  to  be  kept  for  that 
purpose,  open  to  public  inspection;  and  if  the  partnership 
has  places  of  business  situated  in  different  counties,  a  copy 
of  the  certificate,  certified  by  the  recorder  in  whose  office  it 
is  recorded,  must  be  filed  in  the  clerk's  office  and  recorded 
in  like  manner  in  the  office  of  the  recorder  in  every  such 
county.  If  any  false  statement  is  made  in  any  such  certifi- 
cate, all  the  persons  interested  in  the  partnership  are  liable 
as  general  partners  for  all  the  engagements  thereof. 

Sec.  24S1.  An  affidavit  of  each  of  the  partners  stating 
that  the  sums  specified  in  the  certificate  of  the  partnership 
as  having  been  contributed  by  each  of  the  special  partners 
have  been  actually  and  in  good  faith  paid,  in  the  lav;ful 
money  of  the  United  States,  must  be  filed  in  the  same  office 
with  the  original  certificate. 

Sec.  2482.  No  special  partnership  is  formed  until  the 
provisions  of  the  last  five  sections  are  complied  with. 

Sec.  2483.  The  certificate  mentioned  in  this  article  or  a 
statement  of  its  substance  must  be  published  in  a  newspaper 
printed  in  the  county  where  the  original  certificate  is  filed 
("  recorded  "  in  Montana),  and  if  no  newspaper  is  there  printed 
then  in  a  newspaper  in  the  state  nearest  thereto.  Such  pub- 
lication must  be  made  once  a  week  for  four  successive  weeks, 
beginning  within  one  Aveek  from  the  time  of  filing  the  cer- 
tificate. In  case  such  publication  is  not  so  made  the  part- 
nership must  be  deemed  general. 

Sec  2484.  An  affidavit  of  the  making  of  the  publication 
mentioned  in  the  preceding  section,  made  by  the  printer, 

234 


AMERICAN    CODES. 

publisher  or  chief  clerk  of  the  newspaper  in  which  such  })ub- 
lication  is  made,  may  be  filed  with  the  county  recorder  Avith 
whom  the  original  certificate  was  filed,  and  is  presumptive 
evidence  of  the  facts  therein  stated. 

Sec.  2485.  Every  renewal  or  continuance  of  a  sjiecial 
partnership  must  be  certified,  recorded,  verified  and  pub- 
lished in  the  same  manner  as  upon  its  original  formation. 

(In  Montana  the  statutes  added,  "if  not  renewed  it  shall  be 
deemed  a  general  partnership.") 

Aeticle  II. 

POWERS,  RIGHTS    AND   DUTIES    OF    THE    PARTNERS. 

Sec.  2489.  The  general  partners  only  have  authority  to 
transact  the  business  of  a  special  partnership. 

Sec  2490.  A  special  partner  may  at  all  times  investigate 
the  partnership  affairs  and  advise  his  partners  or  their  agents 
as  to  their  management. 

Sec.  2491.  A  special  partner  may  lend  money  to  the  part- 
nership, or  advance  money  for  it,  and  take  from  it  security 
therefor,  and  as  to  such  loans  or  advances  has  the  same  rights 
as  any  other  creditor;  but  in  case  of  the  insolvency  of  the 
partnership,  all  other  claims  which  he  may  have  against  it 
must  be  postponed  until  all  other  creditors  are  satisfied. 

Sec.  2492.  In  all  matters  relating  to  a  special  partner- 
ship, its  general  partners  may  sue  and  be  sued  alone,  in  the 
same  manner  as  if  there  were  no  special  partners. 

Sec  2493.  No  special  partner,  under  any  pretense,  may 
withdraw  any  part  of  the  ca])ital  invested  by  him  in  the 
partnership,  during  its  continuance. 

Sec  2494.  A  special  partner  ma}^  receive  such  lawful  in- 
terest and  such  proportion  of  j)rofits  as  may  be  agreed  ujx)!!, 
if  not  paid  out  of  the  caj)ital  invested  in  the  i)ai'tnerslii|»  l)y 
him,  or  Ijy  some  other  special  partner,  aii<l  is  nuL  bound  to 
refund  the  same  to  meet  subse([ueiit  losses. 

235 


APPENDIX    A. 


Sec.  2195.  If  a  special  partner  withdraws  capital  from 
the  firm,  contrary  to  the  provisions  of  this  article,  he  thereby 
becomes  a  general  partner. 

Sec.  2496.  Every  transfer  of  the  property  of  a  special 
partnership,  or  of  a  partner  therein,  made  after  or  in  oon- 
tenij^lation  of  the  insolvency  of  such  partnership  or  partner, 
with  intent  to  give  a  preference  to  any  creditor  of  such  part- 
nership or  partner  over  any  other  creditor  of  such  partner- 
ship, is  void  against  the  creditors  thereof;  and  every  judg- 
ment confessed,  lien  created,  or  security  given,  in  like  manner 
and  with  the  like  intent,  is  in  like  manner  void. 

> 
Article  III. 

LIABILITY   or   PARTNERS. 

Sec.  2500.  The  general  partners  in  a  special  partnership 
are  liable  to  the  same  extent  as  partners  in  a  general  part- 
nership. 

Sec.  2501.  The  contribution  of  a  special  partner  to  the 
capital  of  the  firm,  and  the  increase  thereof,  is  liable  for  its 
debts,  but  he  is  not  otherwise  liable  therefor,  except  as 
follows : 

1.  If  he  has  wilfully  made  or  permitted  a  false  or  materi- 
ally defective  stateiuent  in  the  certificate  of  the  partnership, 
the  affidavit  filed  therewith,  or  the  published  announcement 
thereof,  he  is  liable,  as  a  general  partner,  to  all  creditors  of 
the  firm. 

2.  If  he  has  wilfully  interfered  with  the  business  of  the 
hrm,  except  as  permitted  in  article  II  of  this  chapter,  he  is 
liable  in  like  manner;  or, 

3.  If  he  has  wilfully  joined  in  or  assented  to  an  act  con- 
trary to  any  of  the  provisions  of  article  II  of  this  chapter, 
he  is  liable  in  like  manner. 

Sec.  25tJ2.  When  a  special  partner  has  unintentionally 
done  any  of  the  acts  mentioned  in  the  last  section,  he  is  lia- 
ble as  a  general  partner  to  any  creditor  of  the  firm  who  has 
been  actually,  misled  thereby  to  his  prejudice. 

2dQ 


AMERICAN    CODES. 

Sec.  2503.  One  "U'lio,  upon  making  a  contract  with  a  part- 
nership, accepts  from  or  gives  to  it  a  written  memorandum 
of  the  contract,  stating  that  the  partnership  is  special,  and 
giving  the  names  of  the  special  partners,  cannot  afterwards 
charge  the  persons  thus  named  as  general  partners  upon  that 
contract,  by  reason  of  an  error  or  defect  in  the  proceedings 
for  the  creation  of  the  special  partnershij),  prior  to  the  ac- 
ceptance of  the  memorandum,  if  an  effort  has  been  made  by 
the  partners,  in  good  faith,  to  form  a  special  partnership  in 
the  manner  required  by  article  I  of  this  chapter. 

Article  IV". 

ALTERATION   AND   DISSOLUTION. 

Sec.  2507.  A  special  partnership  becomes  general  if,  within 
ten  days  after  any  partner  withdraws  from  it,  or  any  new 
partner  is  received  into  it,  or  a  change  is  made  in  the  nature 
of  its  business  or  in  its  name,  a  certificate  of  such  fact,  duly 
verified  and  signed  by  one  or  more  of  the  partners,  is  not 
filed  with  the  county  clerk  and  the  recorder  with  whom  the 
original  certificate  of  the  partnership  was  filed. 

Sec.  2508.  New  special  partners  may  be  admitted  into  a 
special  partnership  upon  a  certificate,  stating  the  names, 
residences  and  contributions  to  the  common  stock  of  each 
of  such  partners,  signed  by  each  of  them  and  by  the  general 
partners,  verified,  acknowledged  or  proved  according  to  the 
provisions  of  article  I  of  this  chapter,  and  filed  with  the 
county  clerk  and  recorder  with  whom  the  original  certificate 
of  the  partnership  was  filed. 

Sec  250D.  A  special  partnership  is  subject  to  dissolution  in 
the  same  manner  as  a  general  partnership,  except  that  lui  dis- 
solution by  the  act  of  the  partners  is  complete  until  a  notice 
thereof  has  been  filed  and  recorded  in  the  ofiice  of  the  county 
clerk  and  recorder  with  whom  the  original  certificate  was 
recorded,  and  published  once  in  each  week  for  four  succes- 

237 


APPENDIX    A. 

sive  weeks  in  a  newspaper  printed  in  each  county  where  the 
partnership  has  a  place  of  business. 

Sec.  2510.  The  name  of  a  special  partner  must  not  be 
used  in  the  firm  name  of  the  partnership  unless  it  be  accom- 
panied with  the  word  "  limited." 

In  Montana  statutes  the  section  (§  3343)  corresponding  to 
section  2510  of  the  California  statutes  differs  somewhat,  and 
reads  as  follows :  "  The  business  of  the  partnership  shall  be 
conducted  under  a  firm  name,  in  which  names  of  the  gen- 
eral partners  only  shall  be  inserted.  If  the  name  of  any 
special  partner  shall  be  used  in  such  firm  name  with  his  con- 
sent, or  if  he  shall  personally  make  any  contract  respecting 
or  concerning  the  partnership  with  any  person  except  the 
general  partner,  he  becomes  liable  as  a  general  partner." 

CHAPTER  IV. 

MINING    PARTNEESHIP. 

Sec.  2511.  A  mining  partnership  exists  when  tAvo  or 
more  persons  who  own  or  acquire  a  mining  claim  for  the 
purpose  of  working  it  and  extracting  the  mineral  there- 
from actually  engage  in  working  the  same. 

Sec.  2512.  An  express  agreement  to  become  partners  or 
to  share  the  profits  and  losses  of  mining  is  not  necessary  to 
the  formation  or  existence  of  a  mining  partnership.  The 
relation  arises  from  the  ownership  of  shares  or  interest  in 
the  mine,  and  working  the  same  for  the  purpose  of  extract- 
ing the  minerals  therefrom. 

Sec  2513.  A  member  of  a  mining  partnership  shares  in 
the  profits  and  losses  thereof  in  the  proportion  in  which  the 
interest  or  share  he  owns  in  the  mine  bears  to  the  whole 
partnership  capital  or  whole  number  of  shares. 

Sec  2514.  Each  member  of  a  mining  partnership  has  a 
lien  on  the  partnership  jDroperty  for  the  debts  due  the  cred- 
itors thereof,  and  for  money  advanced  by  him  for  its  use. 

238 


AMERICAN   CODES. 

This  lien  exists,  notwithstanding  there   is   an  agreement 
among  the  partners  that  it  must  not. 

Sec.  251 5.  The  mining  ground  owned  and  worked  by  ]>art- 
ners  in  mining,  whether  purchased  with  partnership  funds 
or  not,  is  partnership  property. 

Sec.  2516.  One  of  the  partners  in  a  mining  partnership 
may  convey  his  interest  in  the  mine  and  business  without 
dissolving  the  partnership.  The  purchaser,  from  the  date  of 
his  purchase,  becomes  a  member  of  the  partnership. 

Sec.  2517.  A  purchaser  of  an  interest  in  the  mining  ground 
of  a  mining  partnership  takes  it  subject  to  the  liens  existing 
in  favor  of  the  partners  for  debts  due  all  creditors  thereof, 
or  advances  made  for  the  benefit  of  the  partnership,  unless 
he  purchased  in  good  faith,  for  a  valuable  consideration, 
without  notice  of  such  lien. 

Sec.  2518.  A  purchaser  of  the  interest  of  a  partner  in  a 
mine  when  the  partnership  is  engaged  in  working  it  takes 
notice  of  all  liens  resulting  from  the  relation  of  the  partners 
to  each  other  and  to  the  creditors  of  the  partnership. 

Sec.  2519.  No  member  of  a  mining  partnership  or  other 
agent  or  manager  thereof  can,  by  a  contract  in  writing,  bind 
the  partnership,  except  by  express  authority  derived  from 
the  members  thereof. 

Sec.  2520.  The  decision  of  the  members  owning  a  majority 
of  the  shares  or  interest  in  a  mining  partnership  binds  it  in 
the  conduct  of  its  business. 

239 


APPENDIX  A. 

EEVISED  CIYIL  CODE  OF  LOUISIANA. 

TITLE  XI. 
OP  PARTNERSHIP.  ^ 

CHAPTER  1. 

GENERAL  PROVISIONS. 

Art.  280L  Partnership  is  a  synallagmatic  and  commuta- 
tive contract  made  between  two  or  more  persons  for  the 
mutual  participation  in  the  profits  which  may  accrue  from 
property,  credit,  skill  or  industry,  furnished  in  determined 
proportions  by  the  parties. 

Art.  2802.  It  may  be  made  by  all  persons  capable  of  con- 
tracting. 

Art.  2803.  It  is  regulated  by  the  rules  laid  down  in  the 
title:  of  conventional  obligations,  in  all  things  not  differ- 
ently provided  for  by  this  title. 

Art.  2804.  All  partnerships  are  null  and  void  which  are 
formed  for  any  purpose  forbidden  by  law  or  good  morals. 
But  all  the  partners  in  such  a  partnership  are  liable  «Vi  solido 
to  third  persons  wdio  may  contract  with  them  without  a 
knowledge  of  the  illegal  or  immoral  object  of  the  partner- 
ship. 

Art.  2805.  Partnerships  must  be  created  by  the  consent 
of  the  parties. 

Art.  2806.  A  community  of  property  does  not  of  itself 
create  a  partnership,  however  that  property  may  be  ac- 
quired, whether  by  purchase,  donation,  accession,  inheritance 
or  prescription. 

Art.  2807.  The  community  of  property  created  by  mar- 
riage is  not  a  partnership;  it  is  the  effect  of  a  contract  gov- 
erned by  rules  prescribed  for  that  purpose  in  this  code. 

240 


EEYISED    CIVIL   CODE   OF    LOUISIANA. 

Art.  2S0S.  Property,  when  brought  into  partnership  or 
acquired  by  it,  and  the  profits  when  they  are  kept  undivided 
for  the  benefit  of  the  partnership,  are  called  partnership 
stock. 

Art.  2S09.  Property,  credit,  skill  and  industry  being  the 
sources  from  which  a  partnership  may  be  drawn,  each  of 
the  partners  may  furnish  either  or  all  of  these  in  such  pro- 
portions as  they  may  mutually  agree. 

Art.  2810.  By  credit^  in  the  foregoing  article,  is  meant 
not  only  a  reputation  for  responsibility  as  to  pecuniary  con- 
cerns, but  also  any  quality  or  other  circumstance  that  may 
acquire  the  good-will  of  others,  and  contribute  to  the  pros- 
perity of  the  partnership. 

Art.  2811.  It  is  of  the  essence  of  this  contract  that  a 
profit  is  contemplated,  and  that  each  of  the  parties  is  to  par- 
take therein ;  the  proportion  they  are  respectively  to  receive 
is  regulated  by  the  stipulation  of  the  parties,  Avhere  they 
make  any;  where  none  are  made  for  this  purpose,  the  propor- 
tion is  regulated  by  law. 

Art.  2812.  It  is  not  necessar}'',  under  the  last  article,  that 
the  contract  of  partnership  should  provide  for  the  actual 
partition  of  the  profits.  A  stipulation  that  the  profits  shall 
be  converted  into  stock  for  the  benefit  of  all  the  parties  in 
determined  proportions  is  valid. 

Art.  2813.  A  participation  in  the  profits  of  a  partnership 
carries  with  it  a  liability  to  contribute  between  the  parties 
to  the  expenses  and  losses.  But  the  proportion,  like  that  of 
the  profits,  may  be  regulated  by  the  stipulation  of  the  par- 
ties; and  where  they  make  none,  is  provided  for  by  law. 

Art.  2814.  A  stipulation  that  one  of  the  contracting 
parties  shall  participate  in  the  profits  of  a  partnership,  but 
shall  not  contribute  to  losses,  is  void,  both  as  it  regards  the 
partners  and  third  persons.  But  in  the  case  of  a  partnorshij) 
in  cmamendarii,  hereinafter  provided  for,  the  lial)ility  to  loss 
may  be  limited  to  the  amount  of  stock  furnished. 

Art.  2815.     The  foregoing  article  does  not  prevent  the 
partners,  or  any  one  of  tliem,  from  making  a  donation  of 
16  241 


APPENDIX    A. 


their  or  his  profits  arising  from  the  partnership  stock  to  an- 
other, or  even  from  selling  the  same  for  a  valuable  consid- 
eration ;  but  the  donee  or  vendee  is  not  on  that  account 
considered  as  a  partner. 

Art.  2816.  A  partnership  cannot  be  executor,  curator  or 
tutor,  and  cannot  exercise  any  other  private  office. 

Art.  2817.  Hy  j^fivate  office,  in  this  code,  is  meant  such, 
trust  as  relates  solely  to  the  interest  or  affairs  of  one  or 
more  designated  individuals,  but  which  cannot  be  executed 
without  the  assent  of  the  magistrate. 

Art.  2818.  The  nomination  of  a  partnership  to  any  pri- 
vate office  is  not  of  itself  void ;  where  it  is  a  trust  suscepti- 
ble of  being  exercised  by  more  than  one  person,  it  shall  be 
considered  as  a  nomination  of  all  the  members  of  the  part- 
nership, individually,  who  belonged  to  it  at  the  time  of  such 
nomination;  where  the  trust  can,  by  law,  only  be  exercised 
by  one  person,  the  first-named  partner  shall  be  deemed  to 
have  been  the  person  intended. 

Art.  2819.  A  partnership  may  be  appointed  attorney  or 
agent  for  the  performance  of  any  act  or  duty  which  comes 
within  the  object  for  which  the  partnership  is  formed ;  and 
the  responsibility  of  such  trust  or  agency  attaches  to  all  the 
members;  and  they  are  also  entitled  to  all  the  advantages 
resulting  therefrom,  although  one  of  them  may  execute  the 
trust  in  the  name  of  the  partnership,  unless  it  be  differently 
provided  in  the  appointment. 

Art.  2820.  Where  a  partnership  is  appointed  to  perform 
a  trust  or  agency,  foreign  to  the  object  for  which  the  part- 
nership was  formed,  the  appointment  is  not  void ;  it  may  be 
performed  in  the  name  of  the  partnership  if  all  the  partners 
assent,  and  then  the  like  responsibilities  and  advantages  at- 
tach to  the  parties  as  are  set  forth  in  the  last  preceding 
article;  if  the  assent  of  all  the  parties  be  not  given,  the  trust 
or  agency  cannot  be  performed  under  the  power. 

Art.  2821.  If  the  trust  or  agency  is  executed  by  writing, 
whether  required  by  law  to  be  so  done  or  not,  the  assent  re- 
quired by  the  last  article  must  also  be  in  writing. 

242 


REVISED    CIVIL    CODE    OF    LOUISIANA. 

Art.  2S22.  In  an  ordinary  partnership,  if  a  partner  hav- 
ing no  authority  to  make  purchases  for  the  joint  account 
shall  make  any  purchase  in  the  name  of  the  partnershi]i  or 
n  his  own  name  with  the  partnership  funds,  the  other  part- 
lers  may  elect  whether  they  will  take  such  purchase  on  the 
joint  account  or  not. 

Art.  2S23,  The  partnership  property  is  liable  to  the 
creditors  of  the  partnership,  in  preference  to  those  of  the 
individual  partner;  but  the  share  of  any  partner  may,  in  due 
course  of  law.^  be  seized  and  sold  to  satisfy  his  individual 
creditors,  subject  to  the  debts  of  the  partnership;  but  such 
seizure,  if  legal,  operates  as  a  dissolution  of  the  partnership. 

CHAPTER  2. 

RULES  RELATING  TO  THE  DIFFERENT  KINDS  OF  PARTNER- 
SHIPS. 

Section  1. 
OF  the  division  of  partnerships. 
Art.  2824.     Partnerships  are  divided,  as  to  their  object, 
into  commercial  partnerships  and  ordinary  partnerships. 

Art.  2825.  Commercial  partnerships  are  such  as  are 
formed : 

1.  For  the  purchase  of  any  property,  and  the  sale  thereof, 
either  in  the  same  state  or  changed  by  manufacture. 

2.  For  buying  or  selling  any  personal  property  whatever, 
as  factors  or  brokers. 

3.  For  carrying  personal  property  for  hire,  in  ships  or 
other  vessels. 

Art.  2826.  Ordinary  partnerships  are  all  such  as  are  not 
commercial;  they  are  divided  into  universal  and  particular 
partnerships. 

Art,  2S27.  Commercial  partnershij)s  are  divided  into  two 
kinds,  general  and  special. 

Art.  2S28.     There  is  also  a  species  of  partnership  which 

may  be  incorporated  with  either  of  the  other  kinds,  called 

partnership  in  contiucndam. 

243 


apj'endix  a. 

Section  2. 
of  tjniveesal  partnerships. 

Art.  2829.  Universal  partnership  is  a  contract  by  which 
the  parties  agree  to  make  a  common  stock  of  all  the  prop- 
erty they  respectively  possess;  they  may  extend  it  to  all 
property,  real  or  personal,  or  restrict  it  to  personal  only; 
they  may,  as  in  other  partnerships,  agree  that  the  property 
itself  shall  be  common  stock,  or  that  the  fruits  only  shall  be 
such ;  but  property  which  may  accrue  to  one  of  the  parties, 
after  entering  into  the  partnership,  by  donation,  succession 
or  legacy,  does  not  become  common  stock,  and  any  stipula- 
tion to  that  effect,  previous  to  the  obtaining  the  property 
aforesaid,  is  void. 

Art.  2830.  A  universal  partnership  of  profits  includes 
all  the  gains  that  may  be  made  from  whatever  source? 
whether  from  property  or  industry,  with  the  restriction 
contained  in  the  last  article,  and  subject  to  all  legal  stipula- 
tions to  be  made  by  the  parties. 

Art,  2831.  If  nothing  more  is  agreed  between  the  par- 
ties than  that  there  should  be  a  universal  partnership,  it 
shall  extend  only  to  the  profits  of  the  property  each  shall 
possess,  and  of  their  credit  and  industry. 

Art.  2832.  If  commercial  business  be  carried  on  under  a 
universal  partnership,  it  must,  as  to  that  business,  be  gov- 
erned by  the  rules  prescribed  for  other  commercial  partner- 
ships. 

Art.  2833.  Universal  partnership  shall  only  be  contracted 
between  persons  who  are  not  respectively  incapacitated  by 
law  from  conveying  to  or  receiving  from  each  other,  to  the 
injury  of  others. 

Art.  2834.  Universal  partnership  cannot  be  created  with- 
out writing  signed  by  the  parties,  and  registered  in  the  man- 
ner hereafter  prescribed. 

244 


revised  civil  code  of  louisiana. 

Section  3. 
of  particular  partnerships. 

Art.  2835.  Particular  partnerships  are  such  as  are  formed 
for  any  business  not  of  a  commercial  nature. 

Art.  2S36.  If  any  part  of  the  stock  of  this  partnership 
consists  of  real  estate,  it  must  be  in  writing,  and  made  ac- 
cording to  the  rules  prescribed  for  the  conveyance  of  real 
estate,  and  recorded  as  is  hereafter  prescribed  with  respect 
to  partnership  in  commendani. 

Art.  2837.  The  business  of  this  partnership  must  be  con- 
ducted in  the  name  of  all  the  persons  concerned,  unless  a 
firm  is  adopted  by  the  articles  of  partnership  reduced  to 
Avriting,  and  recorded  in  the  manner  directed  by  the  last 
article. 

Art.  2838.  If  the  articles  be  recorded,  the  parties  mav 
themselves  adopt  a  firm  which  shall  be  composed  of  the 
name  of  one  or  more  of  the  partners,  but  no  other  name 
than  those  of  the  parties  concerned  shall  enter  in  such  firm. 

Section  4. 
of  partnership  in  commendam. 

Art.  2839.  Partnership  in  commendam  is  formed  by  a 
contract,  by  which  one  person  or  partnershi])  agrees  to  fur- 
nish another  person  or  partnership  a  certain  amount,  eitlier 
.  in  property  or  money,  to  be  employed  by  the  person  or 
partnership  to  whom  it  is  furnished,  in  his  or  their  own 
name  or  firm,  on  condition  of  receiving  a  share  in  the  i)rotits, 
in  the  proportion  determined  by  the  contract,  and  of  bein<>- 
liable  to  losses  and  expenses  to  the  amount  fui-nished  and 
no  more. 

Art.  2840.  He  who  makes  this  contract  is  called,  with 
respect  to  those  to  whom  he  nuikes  the  advance  of  cajntal, 
a  partner  in  commendam.  Every  species  of  |iartiicrslii|> 
may  receive  such  partners.  It  is  therefore  a  iijodilicLtiun, 
of  which  the  several  kinds  of  partnerships  arc  susceptible, 
rather  than  a  separate  division  ol"  i)ai'tne)'sliips. 

24r, 


APPENDIX    A. 


Art.  2841.  The  proportion  of  profits  to  be  received  by 
the  partner  in  commendcmi  may  be  regulated  by  the  cove- 
nant of  the  parties,  as  may  also,  with  respect  to  each  other, 
the  proportion  of  losses  and  expenses  to  be  borne  by  each 
of  the  partners;  but,  as  respects  third  persons,  the  whole 
sum  furnished,  or  agreed  to  be  furnished,  by  such  partner,  is 
liable  for  the  debts  of  the  partnership. 

Art.  2843.  In  no  case,  except  as  is  hereinafter  expressly 
provided,  shall  the  other  partner  who  has  no  other  interest 
in  the  concern  than  that  of  partner  m  commendam,  he  liable 
to  pay  any  sum  beyond  that  which  he  has  agreed  to  furnish 
by  his  contract.  If  it  has  been  paid  and  lost  in  the  business 
of  the  partnership,  he  is  exonerated  from  any  other  pay- 
ment. If  only  part  be  unpaid,  he  is  liable  for  that  amount, 
and  no  more,  to  the  creditors  of  the  partnership. 

Art.  2843.  The'  partner  in  conmiendam  cannot  be  called 
upon  by  the  partnership  or  its  creditors  to  refund  any  divi- 
dend he  may  have  received  of  net  profits  (fairly  made  dur- 
ing the  solvency  of  the  partners  and  bonajlde),  at  a  time 
stipulated  in  the  articles  of  partnership. 

Art.  2844.  The  partner  in  commendam  cannot  bind  the 
other  partner  by  any  act  of  his;  he  is  not  considered  as  a 
partner  further  than  is  specially  provided  in  this  section. 

Art.  2845.  Partnership  in  commendmn  must  be  made  in 
writing;,  and  must  be  recorded  in  the  manner  hereinafter  di- 
rected,  or  otherwise  the  partner  in  commendam  will  be  con- 
sidered as  a  common  partner  in  the  concern,  and  will  be 
subject  to  all  the  responsibilities  towards  third  persons  that 
would  attach  to  any  of  the  other  parties  in  the  business  for 
which  he  made  his  advance. 

Art.  2846.  The  contract  must  express  the  amount  fur- 
nished, or  agreed  to  be  furnished,  by  the  partner  in  com- 
mendam, the  proportion  of  profits  he  is  to  receive,  and  of 
the  expenses  and  losses  he  is  to  bear.  It  must  state  whether 
it  has  been  received,  and  whether  in  goods,  money,  or  bow 
otherwise ;  and  if  not  received,  it  must  contain  a  stipulation 
to  pay  or  deliver  it.     It  must  be  signed  by  the  parties  in 

246 


KKVISED    CIVIL    CODE    OF    LOUISIAXA, 

the  presence  of  one  or  more  ^\•itnesses,  and  shall  be  recorded 
in  full  b}"  the  officer  authorized  to  record  mortgages  in  the 
place  where  the  principal  business  of  the  partnership  is  car- 
ried on.  If  it  be  a  commercial  jiartnei'sliip,  and  consists  of 
several  houses  or  establishments,  in  different  parts  of  the 
state,  such  recording  shall  be  made  in  each  of  such  places. 

Art.  2847.  The  record  mentioned  in  the  ]ireceding  ar- 
ticle shall  be  made  in  six  days  from  the  time  of  the  execution 
of  the  contract,  in  the  place  where  the  principal  establish- 
ment is  situated,  and  if  there  are  more  than  one,  then  allow- 
ing one  day  for  every  two  leagues  distance  between  such 
principal  establishment  and  the  others. 

Art.  2848.  The  officer  authorized  to  record  mortgages 
shall  keep  a  separate  book  for  the  purpose  of  recording  acts 
of  partnership,  which  shall  be,  at  all  office  hours,  open  for 
the  inspection  of  any  person  who  may  choose  to  consult  the 
same,  and  shall  receive  the  same  fees  to  which  he  is  entitleil 
for  the  recording  of  mortgages  and  for  certiHcates  and  copies. 
When  the  act  is  under  private  signature,  the  record  shall  be 
(jnly  made  on  the  acknowledgment  of  the  act,  before  a  re- 
corder, a  notary,  or  the  person  authorized  to  make  the  rec- 
ord, or  by  a  proof  of  the  execution  made  in  the  same  manner 
by  one  of  the  subscribing  witnesses. 

Art.  2849.  The  business  of  the  partnership  to  which  the 
j)artner  in  coimncndam  has  contributed  his  advance  must 
not  be  carried  on  in  the  name  of  such  ))artner,  or  in  his  name 
jointly  with  others,  or  by  him  or  b}'  his  agency  as  agent,  or 
attorney  for  the  other  partners,  but  by  those  to  whom  he 
has  made  the  advance,  and  in  tiieir  name  or  firm;  and  if  the 
advance  in  eoiainendam  has  Ijcen  made  to  one  person  only, 
such  person  must  carry  on  tiic  Ijusincss  in  his  sole  nanu\and 
must  not  make  the  addition  "and  company"  or  a(lo[)t  any 
firm  that  may  cause  it  to  b(i  undci-stood  (lint  he  lias  any 
1  (artners. 

And  if  the  partner  in  coiiijam<l<ini  sh;iil  tai<t'  any  part  in 
the  business  of  the  partnership,  or  pci-niit  his  name  to  bo 
used  in  the  firm,  or  knowingly  [)erniiL  any  single  person  to 


APPENDIX    A. 

whom  he  has  made  the  advance  to  add  any  words  to  his 
name  or  firm  that  may  imply  that  he  has  other  partners 
besides  the  partner  in  commendam.,  when  in  fact  he  has  none, 
such  partner  in  commendam  shall  be  liable  to  all  the  re- 
sponsibilities of  a  general  partner  in  the  business  for  which 
he  has  made  the  advance. 

Akt.  2S50.  If  the  person  to  whom  the  partner  in  com- 
mendam has  made  the  advance  shall,  without  his  consent, 
use  his  name  in  the  firm,  or  if,  nor  having  any  other  part- 
ner, he  shall  adopt  or  use  any  such  addition  as  is  expressed 
in  the  last  preceding  article,  the  partner  in  Gommendam  may 
immediately  withdraw  the  sum  he  has  advanced,  and,  on 
giving  notice  in  two  of  the  public  newspapers,  shall  be  freed 
from  all  responsibility,  either  to  the  partners  or  to  the  third 
persons  from  the  time  of  such  notice. 

Art.  2851.  The  partner  in  cominendam  cannot  withdraw 
the  stock  he  has  furnished  at  a  time  when  those  to  whom 
he  has  advanced  it  are  in  failing  circumstances,  or  when 
there  is  a  reasonable  apprehension  that  they  will  become  in- 
solvent. 

Section  5. 
of  commercial  partnerships. 

Art.  2852.  All  the  provisions  of  this  title  are  also  appli- 
cable to  commercial  partnerships,  except  as  otherwise  pro- 
vided for. 

CHAPTER  3. 

OF  THE  OBLIGATIONS  OF  PARTNERS  TOWARDS  EACH  OTHER 
AND  TOWARDS  THIRD  PERSONS. 

Section  1. 

OF    the    OBLIGATIONS    OF    PARTNERS     TOWARDS    EACH    OTHER. 

Art.  2853.  When  a  partnership  is  made  without  specify- 
ing any  time  for  its  commencement,  it  begins  at  the  time 
the  contract  is  made. 

Art.  2854.  If  there  has  been  no  agreement  respecting 
the  time  the  partnership  is  to  last,  it  is  supposed  to  have 

248 


REVISED   CIVIL   CODE   OF    LOUISIAXA. 

been  entered  into  for  the  whole  time  of  the  life  of  the  ]iart- 
ners,  under  the  modifications  mentioned  in  article  2SS4;  or 
if  the  partnership  be  entered  into  for  some  affair  the  tlura- 
tion  of  which  is  limited,  for  the  whole  time  such  affair  is  to 
last. 

Art.  2855.  The  contract  of  partnership  may  depend  upon 
conditions. 

Art.  2S56.  Every  partner  owes  to  the  partnership  all  that 
he  has  promised  to  bring  into  the  same. 

"When  this  proportion  consists  of  a  certain  thing,  and  the 
partnership  is  evicted  from  the  same,  such  partner  is  ac- 
countable for  it  towards  the  partnership  in  the  same  man- 
ner as  a  seller  is  answerable  to  the  })urchaser  Avho  buys  from 
him. 

Art.  2857.  The  partner  who  promised  to  bring  into  the 
partnership  a  certain  thing  is  bound,  in  case  of  eviction  of 
it,  in  the  same  manner  as  a  seller  towards  the  purchaser  who 
buys  from  him. 

Art.  2858.  The  partner  who  promised  to  put  a  sum  of 
money  into  the  partnerehip  owes  the  interest  of  the  same 
from  the  day  when  he  was  bound  to  pay  such  sum. 

In  the  same  manner  he  owes  the  interest  on  such  sums  as 
he  may  have  taken  out  of  the  funds  of  the  partnership  from 
the  day  he  has  received  them. 

Art.  2859.  Any  partner  who  has  bound  himself  to  bring 
into  the  partnership  his  skill,  industry  or  credit,  owes  the 
partnership  all  the  profits  which  he  has  made  by  the  exer- 
cise of  such  skill,  industry  or  credit,  or  of  such  proportion 
thereof  as  he  was  bound  to  furnish. 

Art.  2800.  When  one  of  the  partners  is,  for  his  own  juir- 
ticular  account,  creditor  of  a  j)erson  who  is  at  tho  sanic 
time  indebted  unto  the  partnership  for  a  d('l)t  of  tin-  sauii- 
nature  which  is  du(3  likewise,  the  partner  is  Ijound  to  apply 
what  he  receives  from  the  debtor  to  the  discliurgc  of  wliar 
is  due  to  the  partnership  and  to  him,  in  tin;  proportion  of 
both  debts,  although  by  his  receipt  he  siiould  have  applifd 
the  whole  sum  paid  to  what  is  <lue  to  iiiui  in  j)arlicular. 


APPENDIX   A. 


Aet.  2861.  When  one  of  the  partners  has  received  his 
full  share  of  what  is  due  to  the  partnership,  if  the  debtor 
has  become  insolvent  since,  the  partner  who  has  received 
his  full  share  is  bound  to  return  the  same  to  the  partnership, 
although  he  should  have  given  a  receipt  for  his  own  share. 

Akt.  2S62.  Every  partner  is  answerable  to  the  partner- 
ship for  the  damages  which  it  may  have  suffered  by  his 
fault,  without  being  able  to  compensate  such  damages  by 
the  profits  which  his  industry,  skill  or  credit  may  have  pro- 
duced in  the  business  of  the  partnership ;  provided  that  no 
partner  shall  be  held  liable  for  any  loss  ivhich  has  happened 
in  consequence  of  anything  hona  fide  done  or  omitted  by 
him  in  the  legal  exercise  of  his  power,  either  as  administra- 
tor or  partner,  although  such  act  or  omission  should  be  in- 
judicious and  injurious  to  the  partnership. 

Akt.  2863.  If  the  use  only  of  certain  specified  property 
has  been  brought  into  partnership,  and  that  property  is  of 
such  a  nature  that  it  may  be  used  and  enjoyed  without  de- 
stroying it,  the  ownership  remains  in  the  partner  who 
brought  it  in  and  is  at  his  risk.  But  if  such  property  be  de- 
stroyed, or  grow  worse  by  the  keeping  or  the  use  that  is 
made  of  it,  if  it  was  brought  into  partnership  with  the  in- 
tent that  it  should  be  sold,  or  if  it  was  taken  at  an  estimated 
value  ascertained  by  an  inventory  or  some  other  writing,  in 
either  of  these  cases,  although  the  use  only  was  contributed, 
the  property  is  at  the  risk  of  the  partnership;  and  in  case 
of  loss  or  injury,  the  partner  who  brought  it  in  is  a  creditor 
of  the  partnership  to  the  amount  of  the  credit  or  loss;  pro- 
vided that  all  the  provisions  of  this  article  may  be  controlled 
by  the  covenants  of  the  parties. 

Art.  2861.  A  partner  may  be  a  creditor  of  the  partner- 
ship not  only  for  the  sums  which  he  has  disbursed,  but  like- 
wise for  the  obligations  he  has  entered  into  hona  fide  for  the 
partnership  and  for  losses  reasonably  incurred  in  his  admin- 
istration. 

Art.  2865.  When  the  contract  of  partnership  does  not 
determine  the  sliare  of  each  partner  in  the  profits  or  losses, 

250 


REVISED    CIVIL    CODE    OF    LOLISIAXA. 

each  one  shall  be  entitled  to  an  equal  share  of  the  profits, 
and  must  contribute  equally  to  the  losses. 

Akt.  2S66.  If  the  partners  have  agreed  to  refer  to  one  of 
them  or  to  a  third  person  for  the  regulation  of  the  shares, 
this  regulation  cannot  be  annulled,  unless  it  be  by  certain 
])roofs  that  it  is  contrary  to  equity. 

Art.  2S07.  The  partner  intrusted  with  the  administra- 
tion of  the  affairs  of  the  partnership  by  a  special  })o\ver 
given  in  writing,  either  by  the  articles  of  partnershij)  or 
(Otherwise,  may,  without  the  assent  of  the  other  partners  and 
contrary  to  their  prohibition,  do  any  act  which  they  have 
authorized  him  to  do  by  such  power,  provided  it  be  without 
fraud,  and  in  his  opinion  for  the  advantage  of  the  society. 

This  power,  if  contained  in  the  articles  of  copartnership, 
cannot  be  revoked,  without  a  lawful  cause,  as  lono;  as  the 
partnership  lasts.  But  if  the  power  of  administering  be 
given  subsequent  to  the  articles  of  partnership,  it  is  a  simple 
mandate  and  may  be  revoked. 

Art.  2868.  When  several  partners  are  intrusted  with  the 
administration  without  their  duties  being  j)ointed  out,  or 
when  it  is  not  expressed  that  one  shall  not  be  able  to  act 
without  the  other,  they  may  do  separately  all  the  acts  relat- 
ing to  such  administration. 

Art.  2869.  If  it  has  been  stipulated  that  one  of  the  ad- 
ministrators shall  not  do  anything  without  the  other,  one 
alone  cannot  act,  even  when  the  other  is  prevented  by  sick- 
ness or  otherwise  from  taking  a  i)art  in  the  acts  which  I'clato 
to  the  administration,  until  there  be  a  new  aiireument  be- 
tween  the  partners. 

Art.  2870.  "When  there  is  no  agreement  resjjecting  admin- 
istration in  the  act  of  partnership,  the  following  rules  are 
adhered  to: 

1.  The  partners  are  supposed  to  liave  given,  reciprocally, 
to  each  other  the  power  of  administering  one  for  the  otlier; 
what  one  does  is  valid,  even  for  the  share  of  his  partners, 
without  receiving  their  ap[>r(>bati(>ii,  saving  the  right  which 


APPENDIX    A. 

they  or  every  one  of  the  partners  has  to  oppose  the  opera- 
tion before  it  be  concluded. 

2.  Every  partner  may  make  use  of  the  things  belonging 
to  the  partnership,  provided  he  employs  the  same  to  the 
uses  for  which  they  are  intended,  and  he  does  not  use  them 
in  such  a  manner  as  to  prevent  his  partners  from  using  them 
according  to  their  rights,  or  against  the  interest  of  the  part- 
nership. 

3.  Every  partner  has  a  right  to  bind  his  partners  to  con- 
tribute with  him  to  the  expenses  which  are  necessary  for  the 
preservation  of  the  things  of  the  partnership. 

4.  A  partner  can  neither  dispose  of  nor  make  any  change 
in  any  real  property  belonging  to  the  partnership,  without 
the  consent  of  his  partners,  should  even  this  disposition  or 
change  be  advantageous  to  the  partnership. 

5.  In  other  than  commercial  partnerships  a  partner  can- 
not as  partner  only,  and  if  he  has  not  the  administration, 
alienate  or  engage  the  things  which  belong  to  the  partner- 
ship, 

Akt.  2871.  Every  partner  ma}^  without  the  consent  of 
his  partners,  enter  into  a  partnership  with  a  third  person 
for  the  share  which  he  has  in  the  partnership,  but  he  cannot, 
without  the  consent  of  his  partners,  make  him  a  partner 
in  the  original  partnership,  should  he  even  have  the  admin- 
istration of  it. 

He  is  responsible  for  the  damages  occasioned  by  this  third 
person  to  the  partnership,  in  the  same  manner  as  he  answers 
for  those  he  has  occasioned  himself,  according  to  article 
2862. 

Section  2, 

OF   THE   obligations    OF   PARTNERS    TOWARDS    THIRD   PERSONS. 

Art,  2872.  Ordinary  partners  are  not  bound  in  soUdo  for 
the  debts  of  the  partnership,  and  no  one  of  them  can  bind 
his  partners,  unless  they  have  given  him  power  so  to  do, 
either  specially  or  by  the  articles  of  partnership. 

Commercial  partners  are  bound  in  solido  for  the  debts  of 

the  partnership, 

353 


EEVISED   CIVIL    CODE    OF   LOUISIANA. 

Art.  2S73.  In  the  ordinar}-  partnership  each  partner  is 
bound  for  his  share  of  the  partnership  debt,  calculating  such 
share  in  proportion  to  the  number  of  the  partners,  without 
any  attention  to  the  proportion  of  the  stock  or  profits  each 
is  entitled  to. 

Art.  2874.  If  a  debt  be  contracted  by  one  of  the  part- 
ners of  an  ordinary  partnership,  who  is  not  authorized, 
either  in  his  own  name  or  that  of  the  partnership,  the  other 
partners  will  be  bound,  each  for  his  share,  provided  it  be 
proved  that  the  partnership  was  benefited  by  the  transaction. 

Art.  28T5.  All  engagements  made  relative  to  the  part- 
nership affairs,  by  the  person  appointed  to  administer  the 
business  of  an  ordinary  partnership  by  articles  of  partner- 
ship duly  recorded  and  pursuant  to  those  powers,  shall  bind 
all  the  partners. 

CHAPTER  4. 

OF  THE   DIFFERENT   MANNERS   IN  WHICH  PARTNERSHIPS 

END. 

Art.  2876.     A  partnership  ends : 

1.  By  the  expiration  of  the  time  for  which  such  partner- 
ship was  entered  into. 

2.  By  the  extinction  of  the  thing,  or  the  consummation  of 
the  negotiation. 

3.  By  the  death  of  one  of  the  partners,  or  by  his  interdic- 
tion. 

4.  By  bankruptcy. 

.5.  By  the  will  of  all  the  parties,  legally  expressed,  or  by 
the  will  of  any  of  them,  founded  on  a  legal  cause,  and  ex- 
pressed in  the  manner  directed  by  law. 

Art.  2877.  When  a  partnershij)  has  been  entered  into 
for  a  limited  time,  it  ends  of  course  at  the  exj)irationof  that 
time. 

Art.  28T8i.  The  prorogation  which  may  bo  agreed  upon 
between  the  parties  shall  be  made  and  proved  in  the  same 
manner  as  the  contract  of  partnership  itself. 

253 


APPENDIX    A. 


Art.  2879.  If  a  partnership  has  been  entered  into  the 
stock  of  which  is  to  be  formed  with  the  proceeds  of  a  sale, 
to  be  made  in  common,  of  several  things  belonging  to  each 
partner,  and  if  it  happen  that  the  thing  belonging  to  one  of 
them  is  destroyed,  the  partnership  shall  be  extinguished. 

Art.  2880.  Every  partnership  ends  of  right  by  the  death 
of  one  the  partners,  unless  an  agreement  has  been  made  to 
the  contrary. 

Art.  2881.  The  death  of  one  partner  dissolves  the  part- 
nership between  the  surviving  parties,  unless  there  be  a  con- 
trary stipulation. 

Art.  2882.  If  it  has  been  stipulated  that,  in  case  of  the 
death  of  one  of  the  partners,  the  partnership  should  con- 
tinue between  the  heir  of  the  deceased  and  the  surviving 
partners,  or  between  the  surviving  partners  only,  either  of 
these  stipulations  shall  be  observed. 

But  if  the  stipulation  be  that  the  partnership  shall  con- 
tinue between  the  survivors  only,  the  heir  of  the  deceased 
shall  be  entitled  to  a  division  of  the  partnership  property  as 
it  stood  at  the  day  of  the  death  of  his  ancestor,  and  to  a 
share  in  the  profits  of  any  partnership  operation  in  which 
his  share  of  the  stock  was  employed,  and  which  was  unfin- 
ished at  that  time. 

Art.  2883.  The  interdiction  of  one  of  the  partners  or  his 
bankruptcy  has  as  to  the  dissolution  of  the  partnership,  the 
same  effect  as  the  death  of  one  of  the  partners. 

Art.  2884.  If  the  partnership  has  been  contracted  with- 
out any  limitation  of  time,  one  of  the  partners  ma}^  dissolve 
the  partnership  by  notifying  to  his  partners  that  he  does 
not  intend  to  remain  any  longer  in  the  partnership,  pro- 
vided, nevertheless,  the  renunciation  to  the  partnership  be 
made  honajide,  and  it  does  not  take  place  unseasonably. 

Art.  2885.  The  renunciation  is  not  hona  jide  when  the 
partner  renounces  for  the  purpose  of  appropriating  to  him- 
self the  profits  which  the  partners  expected  to  receive  from 

the  partnership. 

254 


KE"CISED    CIVIL    CODE    OF    LOUISIANA. 

Art.  2SSG.  The  renunciation  is  made  unseasonably  if  it 
be  made  at  the  time  when  things  are  no  longer  entire,  antl 
when  the  interest  of  the  partnership  requires  that  its  disso- 
hition  be  postponed.  The  common  interest  of  the  partner- 
ship is  considered,  and  not  the  interest  of  the  partner  who 
opposes  the  renunciation. 

Art.  2SS7.  AltLiough  the  partnership  may  have  been  en- 
tered into  for  a  limited  time,  one  of  the  partners  may,  ])ro- 
A'ided  he  has  just  cause  for  the  same,  dissolve  the  partnership 
before  the  time,  even  where  inconveniences  might  result  for 
the  partners,  and  although  it  might  have  been  stipulated  that 
the  partners  could  not  desist  from  the  partnership  before  the 
stipulated  time. 

Art.  2888.  There  is  just  cause  for  a  partner  to  dissolve 
the  partnership  before  the  appointed  time,  when  one  or 
more  of  the  partners  fail  in  their  obligations,  or  when  an 
habitual  infirmity  prevents  him  from  devoting  himself  to 
the  affairs  of  the  partnership,  which  require  his  presence  or 
his  personal  attendance. 

Art.  2889.  The  renunciation  of  the  partnership  by  one 
of  the  partners  does  not  operate  the  dissolution  of  the  part- 
nership, unless  it  be  notified  to  all  the  other  partners. 

Art.  2890.  The  fules  concerning  the  partition  of  succes- 
sions, the  manner  of  making  such  partition,  and  the  obliga- 
tions which  result  from  the  same,  between  heirs,  apply  to 

partners. 

'  355 


APPENDIX  B. 


•  PARTNERSHIP  FORMS. 

The  following  simple  form  may  prove  suggestive.  It  is 
divided  into  distinct  clauses,  to  a  greater  extent  than  might 
otherwise  be  thought  advisable,  in  order  to  give  prominence 
to  each,  A  great  variety  of  special  clauses,  not  here  in- 
cluded, are  in  use  in  special  cases. 

ARTICLES  OF  PARTNERSHIP. 

This  agreement,  made  this  first  day  of  January,  A.  D. 
1894,  between  Adam  Smith,  Edwin  Arnold  and  Robert 
Burns,  all  of  the  city  of  Ann  Arbor,  Washtenaw  county,  and 
state  of  Michigan,  witnesseth: 

1.  The  said  parties  hereby  agree  that  they  will  become 
and  be  partners  in  business  for  the  purpose  and  upon  the 
terms  hereinafter  stated. 

2.  The  firm  name  of  the  partnership  shall  be  Adam  Smith 
&  Company. 

3.  The  business  to  be  carried  on  by  said  partnership  is 
that  of  buying  and  selling  dry  goods  at  wholesale  and  re- 
tail, and  carrying  on  a  general  dry  goods  business. 

4.  The  place  at  w^hieh  the  said  business  is  to  be  carried  on 
is  the  said  city  of  Ann  Arbor. 

5.  The  term  for  which  the  said  partnership  is  organized  is 
five  years  from  and  after  February  L,  LSlMr. 

<).  The  capital  of  said  firm  is  to  be  the  sum  of  .$15,000,  of 
which  each  of  the  said  partners  is  to  o(>i)tiMl)iiLe  «Mie-third 
part  in  cash,  on  or  before  F(;f)ruary  IT),  ISIH,  and  tliey  ai-e 
to  share  in  the  profits  and  losses  of  said  business  in  the  same 
proportion. 

17  257 


APPENDIX    B. 

7.  Each  of  said  partners  is  to  give  his  undivided  time  and 
attention  to  the  said  business,  and  is  to  use  his  utmost  en- 
deavors to  promote  the  interests  of  the  said  firm. 

8.  Books  of  account  of  the  transactions  of  said  partner- 
ship shall  be  kept  at  the  place  of  business,  and  shall  be  at  all 
times  open  to  inspection  by  any  partner.  Each  partner 
shall  cause  to  be  entered  upon  said  books  a  just  and  true 
account  of  all  his  dealings,  receipts  and  expenditures  for  or 
on  account  of  said  firm. 

y.  In  the  month  of  January  in  each  year,  a  full  and  com- . 
plete  inventory  of  stock  shall  be  taken,  and  a  complete  state- 
ment of  the  condition  of  said  partnership  shall  be  made,  and 
an  accounting  between  the  said  partners  shall  be  had,  and 
the  profits  or  losses  of  the  preceding  year  shall  be  then  di- 
vided and  paid  or  contributed. 

10.  Each  of  said  partners  shall  be  permitted  to  draw 
from  the  funds  of  said  firm  the  sum  of  $100  per  month  for 
his  living  expenses.  Such  sums  so  drawn  shall  be  charged 
to  him,  and  at  the  annual  accounting  shall  be  charged  against 
his  share  of  the  profits.  If  his  share  of  the  profits  shall  not 
be  equal  to  the  sum  so  drawn,  he  shall  pay  the  deficiency 
into  the  said  firm. 

11.  Ivleither  of  said  partners  shall,  without  the  consent  of 
the  others,  compromise  or  release  debts  except  upon  full 
payment  thereof,  or  engage  in  any  unusual  transaction  or 
make  any  contract  on  the  partnership  account  involving 
more  than  8500;  or  use  the  firm's  name,  credit  or  property 
for  other  than  partnership  purposes ;  or  sign  or  indorse  ne- 
gotiable paper  or  become  surety  for  third  persons;  or  en- 
gage in  any  speculation ;  or  knowingly  do  any  act  by  which 
the  interests  of  said  partnership  shall  be  imperfied  or  preju- 
<licecl. 

12.  All  questions  of  difference  as  to  the  management  of 
the  business  shall  be  decided  by  a  majority  of  said  partners, 
and  no  partner  shall  knowingly  do  any  act  in  relation  thereto 
contrary  to  the  decision  of  the  majority. 

13.  Either  of  said  partners  may  retire  from  the  said  part- 

258 


PARTXKRSniP    FORMS. 

nersliip  at  any  time  upon  giving  his  said  partners  three 
months'  notice  of  his  intention  so  to  do. 

14.  Upon  the  dissohition  of  said  partnership,  by  reason  of 
the  death,  withdrawal  or  other  act  of  an}^  partner,  the  re- 
maining partners  shall  have  the  right  to  purchase  the  inter- 
est of  such  partner  in  the  business,  assets  and  good-will,  by 
paying  the  value  of  such  interest  as  determined  by  the  last 
annual  inventory  and  accounting,  together  with  six  per 
cent,  interest  upon  such  value  since  said  inventory.  Upon 
such  payment  the  retiring  partner  or  his  representatives 
shall  execute  and  deliver  to  the  remaining  members  all  nec- 
essary conveyances  of  such  interest. 

15.  Upon  the  final  dissolution  of  said  firm  by  lapse  of 
time  or  otherwise,  the  said  business  shall  be  wound  up,  the 
debts  paid,  and  the  surplus  divided  between  the  partners  in 
accordance  Avith  their  interest  therein. 

In  witness  whereof,  we  have  hereunto  self  our  hands,  the 
day  and  year  first  above  written.  Adam  Smith. 

Edwin  Arnold. 
Robert  Burns. 


NOTICE  OF  DISSOLUTION. 

(To  be  published  and  also  delivered  to  all  jjrevious  customers.) 

Notice  is  hereby  given  that  the  copartnership  heretofore 
existing  between  Adam  Smith,  Edwin  Arnold  and  Robert 
Burns,  under  the  firm  name  of  Adam  Smitli  tV:  Coinjiany, 
and  doing  business  at  Ann  Arbor,  Michigan,  has  been  this 
day  dissolved  by  mutual  consent.  \^If  desired^  add:  Robert 
l>urns  has  retired  from  said  firm  and  business,  l)ut  the  said 
Adam  Smith  and  Edwin  Arnold  will  continue  the  business 
at  the  same  place  and  under  the  same  firm  name.] 

Dated,  Ann  Arbor,  Michigan,  May  1,  l!^;t<;. 

Adam  Smitji. 

P^DWIN  Arnoi,]). 

JioJJEKT   BUBNS. 
259 


APPENDIX   B. 

CERTIFICATE  OF  LIMITED  PARTNERSHIP. 

(To  be  filed  and  recorded  in  office  of  the  clerk  of  the  county  in  which 
the  principal  place  of  business  is  to  be  located.) 

The  undersigned,  being  desirous  of  forming  a  limited  part- 
nership in  pursuance  of  the  statutes  of  the  state  of  Michigan 
authorizing  their  formation  (the  same  being  chapter  78  of 
Howell's  Annotated  Statutes),  do  hereby  make  and  severally 
sign  the  following  certificate  for  that  purpose : 

1.  The  name  under  which  the  partnership  is  to  be  con- 
ducted is  Adam  Smith  &  Company. 

2.  The  general  nature  of  the  business  to  be  transacted  is 
that  of  buying  and  selling  dry  goods  at  Tvholesale  and  re- 
tail. 

3.  The  names  of  all  the  general  and  special  partners  are 
Adam  Smith,  Edwin  Arnold  and  Robert  Burns,  and  the 
place  of  residence  of  each  is  the  city  of  Ann  Arbor,  Michi- 
gan. Of  these  partners,  Adam  Smith  and  Edwin  Arnold 
are  the  general  partners,  and  Robert  Burns  is  the  special 
partner. 

4.  The  amount  of  capital  which  said  Robert  Burns  has 
contributed  to  the  stock  of  said  partnership  is  $5,000  in 
cash. 

5.  The  period  at  which  said  partnership  is  to  commence 
is  July  1,  1896,  and  the  period  when  it  will  terminate  is 
July  1,  1899. 

In  witness  whereof,  we  have  hereunto  set  our  hands  and 

seals  this  25th  day  of  June,  A.  D.  1896. 

Adaji  Smith. 

Edwin  Arnold. 

Robert  Burns. 
State  of  Michigan,  \ 

County  of  Washtenaw.  \ 

On  this  25th  day  of  June,  A.  D.  1896,  before  me,  a  no- 
tary public  in  and  for  said  county  and  state,  personally 
came  the  above-named  Adam  Smith,  Edwin  Arnold  and 
Robert  Burns,  to  me  known  to  be  the  persons  named  in  and 

280 


PARTNERSHIP   FORMS. 

who  executed  the  foregoing  certificate,  and  they  severally 
acknowledged  the  execution  thereof  for  the  intents  and 
purposes  therein  specified.  Richard  Roe, 

Notary  Public  in  and  for  "Washtenaw 
County,  Michigan. 

Affidavit. 
(To  be  filed  with  the  above  certificate.) 
State  or  Michigan, 


County  of  "Washtenaw.  ^  ^^* 

Adam  Smith,  being  duly  sworn,  deposes  and  says  that  he 
is  one  of  the  general  partners  named  in  the  above  certificate; 
and  that  the  sum  therein  specified  to  have  been  contributed 
by  Robert  Burns,  the  special  partner,  to  the  common  stock 
has  actually  and  in  good  faith  been  contributed  and  applied 
to  the  same.  Adam  Smith. 

Subscribed  and  sworn  before  me  this  25th  day  of  June, 
A.  D.  1896.  Richard  Roe, 

Notary  Public  [as  above]. 

The  county  clerk  then  designates  two  newspapers  in  which 
notice  shall  be  published,  and  the  terms  of  the  partnership, 
as  set  forth  in  clauses  1-5,  are  to  be  published  for  six  weeks 
immediately  after  recording  the  certificate.  Affidavits  show- 
ing due  publication  are  then  to  be  filed  with  the  county 

clerk. 

261 


INDEX. 


References  are  to  sections. 
x^CCEPTANCE  (see  Bills  and  Notes). 
ACCOMMODATION  — 

partner  no  implied  power  to  bind   firm   for  accommodation  of 
stranger,  188. 

ACCOUNT  STATED  — 

action  at  law  may  be  brought  upon,  when,  130. 
ACCOUNTING  — 

who  may  demand,  154. 

in  what  court.  153,  154. 

all  profits  and  advantages  must  be  accounted  for,  112. 

not  usually  ordered  of  illegal  transactions,  20. 

usually  had  only  on  dissolution,  153. 

basis  of,  302. 

manner  of,  305. 

reopening  or  restating,  309. 
ACCOUNTS  — 

duty  of  each  partner  to  keep,  116. 

presumption  against  partner  who  fails,  116. 
ACTIONS  — 

respecting  partnership  transactions  not  usually  cognizable  at  law, 
130  et  seq. 

one  partner  cannot  sue  another  at  law,  when,  130-134. 

one  partner  can  sue  another  at  law,  wlien,  135-146. 

one  partner  cannot  sue  firm  at  law,  130-132. 

firm  cannot  sue  partner  at  law,  133. 

in  equity,  what  may  l)e  brought,  148-150. 

who  should  sue  in  actions  by  tlio  firm,  222-220. 

who  should  sue  in  actions  against  the  firm,  227-230. 

cannot  usually  be  brought  in  linn  name,  325. 

ADMINISTRATOR  (see  Exfx'UTOk). 
ADMISSIONS  — 

partner  cannot  bind  firm  l)y,  when,  10!). 

after  dissolution,  272. 

as  evidence  of  partnership,  36. 

power  to  make,  after  dissolution,  272. 

203 


INDEX. 

References  are  to  sections. 

ADVERTISEMENT  — 

of  dissolution,  see  Notice  of  Dissolution. 

AGENCY  — 

as  a  test  of  partnership,  58-68. 
partner's,  for  the  firm,  164  et  seq. 

AGENT  — 

of  the  implied  powers  of  partners  as  agents  for  the  firm,  164. 
power  of  partnership  to  be,  170, 
power  of  partner  to  appoint,  170. 
liability  of  firm  for  acts  of,  207. 

AGREEMENT  BETWEEN  PARTNERS  — 
action  for  breach  of,  135  et  seq. 
on  dissolution,  effect  of,  274-276. 

AGREEMENT  TO  ENTER  INTO  PARTNERSHIP  — 
how  enforced,  136. 

AGREEMENTS  — 

what  operate  to  create  partnership,  45-54. 

ALIEN  — 

power  of,  to  be  a  partner,  22. 

APPLICATION  OF  ASSETS  — 

how  assets  of  firm  to  be  applied,  285  et  seq. 
by  going  partnership,  287. 
by  court,  289-300, 
ARBITRATION  — 

power  of  partner  to  submit  claims  to,  171. 

ARTICLES  OF  PARTNERSHIP  (see  Partnership  Articles). 

ASSETS  (see  Property;  Application  op  Assets). 

ASSIGNMENT  FOR  CREDITORS  — 
power  of  partner  to  make,  172. 
power  of  surviving  partner  to  make,  268. 

ASSOCIATIONS  — 

other  than  partnerships,  7. 

ASSUMING  DEBTS  — 
on  dissolution,  274. 
action  for  not  paying,  141. 

ATTORNEYS  — 

power  of  partner  to  employ,  173. 

liability  of  firm  of,  for  partner's  negligence,  204. 
AUTHORITY  (see  Powers  of  Partners). 

264 


INDEX. 

References  are  to  sections. 
BANKRUPTCY  — 

effect  of,  to  dissolve  the  firm,  247. 
BILLS  AND  NOTES  — 

implied  poAver  of  partner  to  make,  indorse  or  accept,  174. 
power  of  surviving  partner,  268. 
of  partner  after  dissolution,  271. 
of  partner  in  non-trading  firm,  174. 

BREACH  OF  TRUST  — 

liability  of  firm  for  partner's,  206. 
BURDEN  OF  PROOF ^ 

of  partnership,  37. 
BUYING  (see  Purchase). 
CAPACITY  — 

to  be  partner,  see  Partner. 
CAPITAL  — 

of  firm,  what  constitutes,  90. 

amount  and  interests  in,  91. 

in  what  contributed,  92. 

loss  of,  how  borne,  307. 
CARE  AND  SKILL  — 

duty  of  partner  to  exercise,  114. 
CHANGE  IN  FIRM  — 

operates  as  dissolution,  29. 
CLASSIFICATION  — 

of  partners  and  partnerships,  15,  16. 
CLUBS  — 

are  not  partnerships,  7. 
COMMITTEES  — 

not  partnershii>s,  7. 
COMMON  MEMBER  — 

effect  where  two  firms  have,  202. 

cannot  sue  at  law,  147. 
COMPENSATION  — 

partner  not  entitled  to  extra,  unless  stipulated  for,  119. 
(COMPETITION  — 

dut}'  of  partner  not  to  carry  on  business  in  competition  of  firm,  113. 

of  contiicting  claimants  to  assets,  291,  296. 
see  Application  of  Assets. 
COMPROMISE  — 

power  of  partner  to,  178. 
CONSTRUCTION  — 

of  partnersliip  articles,  77. 

26.'} 


INDEX. 

References  are  to  sections. 
CONSULTING  — 

duty  of  partners  as  to,  117. 

CONTEMPLATED  PARTNERSHIPS  — 

when  become  charged  with  liability,  13,  14,  34.- 

CONTINUING  PARTNER  — 

right  of,  to  use  former  firm  name,  86. 

CONTINUING  PARTNERSHIP  — 

under  old  articles,  79. 

CONTRACT  RELATION  — 
partnership  is,  3. 

CONTRACTS  — 

implied  power  of  partner  to  make,  164. 

who  are  bound  by,  193. 

how  when  made  by  partner  in  his  own  name,  194,  195. 

how  when  made  in  individual  names  of  all  partners,  200. 

how  when  firm  does  business  in  name  of  one  partner,  201. 

how  when  two  firms  of  same  name  have  common  member,  202. 

obligations  of  partners  upon,  is  joint,  209. 

who  should  be  sued  in  actions  upon,  228  et  seq. 

who  should  sue  in  actions  upon,  223  et  seq. 

illegal  effect  of,  17-20. 

CONTRIBUTION  — 

partner  entitled  to,  who  pays  more  than  his  share,  125-127. 

how  enforced.  127. 

when  entitled,  if  transaction  illegal,  126. 

CONVERSION  — 

of  firm  property  into  individual  property,  298. 

CO-OWNERSHIP  (see  Joint  Tenancy;  Tenancy  in  Common). 

CORPORATION  — 

how  partnership  differs  from,  6. 
what  constitutes  de  facto  corporation,  11. 

whether  members  of  defectively  organized  corporations  are  part- 
ners, 10,  11. 
power  of  corporations  to  enter  into  partnership,  26. 

COX  V.  HICKMAN  — 

effect  of,  on  law  of  partnership,  58-68. 

CREDITORS  — 

priority  of,  in  partnership  assets,  289  et  seq. 
firm  creditors  first  paid  out  of  firm  assets,  289. 
individual  creditors  first  paid  out  of  individual  assets,  293. 

266 


INDEX. 

Keferences  are  to  sections. 
DEATH  - 

operates  to  dissolve  partnership,  245, 

DEBTS  — 

order  of  payment  of,  out  of  assets,  285  et  seq. 

priority  of,  289  et  seq. 

power  of  firm  to  assume  debts  of  partner,  288. 

of  partner  to  assume  debts  of  firm  (see  Assuming  Debts). 

DECEASED  PARTNER  — 

interest  of  estate  of,  in  partnership  assets,  268. 

liability  of  his  estate,  270. 

DECEIT  — 

dissolving  partnership  for,  251. 

DECLARATIONS  (see  Admissions). 

DECREE  — 

of  dissolution.  251  et  seq. 

DE  FACTO  CORPORATION  — 

what  constitutes.  11. 

DEFECTIVELY  ORGANIZED  CORPORATIONS  — 

are  not  partnerships,  when,  10,  11. 

DELECTUS  PERSONARUM  — 

right  of,  29. 

DISSENT  — 

power  of  partner  to  dissent  from  contemplated  acts,  162. 

DISSOLUTION  — 

causes  for,  231  et  seq. 

by  original  agreement,  232-234. 

by  act  of  jmrties,  235-243. 

by  act  of  law,  244-257. 

by  death,  245. 

by  marriage,  248. 

)jy  war,  250. 

by  guardianship,  249. 

l>y  insanity,  246. 

by  bankruptcy',. 247. 

by  sale  of  partner's  interest,  99,  243. 

notice  of,  258  et  seq. 

to  whom  given,  201. 

wlien  required,  200. 

liow  given,  262. 

by  whom  given,  264. 

effect  on  powers  of  partners,  267  et  seq. 

of  surviving  partner,  268,  269 

of  liquidating  jiartner,  273. 

of  partners  generally,  271,  272. 

207 


INDEX. 

Beferencea  are  to  sections, 

DORMANT  PARTNER  — 
who  is,  16. 
how  liable,  193. 

whei.  should  be  party  to  action,  223,  229. 
when  should  give  notice  of  dissolution,  265. 
has  no  lien  as  against  creditors  of  ostensible  partners,  299. 

DOWER  — 

when  widow  of  partner  entitled  to,  in  partnership  lands,  109, 

DUTIES  — 

of  partners  to  each  other,  1 12-127. 
to  esei'cise  good  faith,  112. 
not  to  compete  in  business,  113, 
to  exercise  care  and  skill,  114. 
to  conform  to  partnership  agreements,  115, 
to  keep  accounts,  116. 
to  consult  with  other  partners,  117. 
to  permit  others  to  participate  in  management,  118. 
to  indemnify  copartners,  125-127. 

ENTITY  — 

partnership  as  a  distinct,  4. 

EQUITY  — 

the  forum  for  partnership  actions,  148. 
what  actions  maintainable  in,  148-156, 

ESTOPPEL  — 

partnership  by,  69-73. 

EVIDENCE  — 

of  existence  of  partnership,  35-37. 

of  partnership  by  holding  out,  69  et  seq, 

EXECUTION  — 

sale  of  partner's  interest  upon,  100. 

levy  on  partner's  property  for  firm  debt,  215. 

exemptions  from,  217. 

EXECUTOR  — 

interest  of  in  partnership  assets,  268. 

EXEMPTIONS  — 

power  of  fii'm  or  partner  to  claim,  217. 

FIRM  — 

meaning  of  term,  1. 
see  Partnership. 

268 


INDEX. 

References  are  to  sections. 
FIRM  NAME  — 

necessity  of,  82. 

what  may  be,  83. 

what  may  be  done  in,  84 

property  in.  85. 

riglit  to,  uix)n  sale  or  dissolution,  86,  89. 
FRAUD  — 

as  ground  for  dissolving  partnership,  251,  253. 

GENERAL  PARTNER  (see  Limited  Partnership) 
who  is,  16. 

GENERAL  PARTNERSHIP  — 
what  constitutes,  15. 

GOOD  FAITH  — 

duty  of  partners  to  exercise  to  each  other,  112. 

GOOD  WILL  — 

what  constitutes,  87. 

as  an  asset,  88. 

disposal  of,  on  dissolution,  89. 

GUARANTY  — 

partner  no  implied  power  to  bind  firm  by,  188. 

GUARDIANSHIP  — 

dissolves  parthei'ship,  249. 

HIRING  PROPERTY  — 

implied  power  of  partner  aS  to,  181, 

HOLDING  OUT  — 

liability  as  partner  by,  69  et  seg. 

ILLEGAL  OB.JECTS  — 

effect  of,  on  partnership,  17-20. 

IMPLIED  POWERS  — 
of  partners,  165  et  seq. 

IMPOSSIBILITY  OF  SUCCESS  — 
as  ground  for  dissolution,  257. 

INCOMING  PARTNER  — 
liability  of,  219. 

INDEMNITY  — 

partner  entitled  to,  when.  125-127. 

action  for  not  furnishing,  140. 

INDISSOLUBLE  PARTNERSHIP  — 

can  there  be,  240  et  aeq. 

269 


INDEX. 

Keferences  are  to  sections. 
INFANT  — 

may  be  a  partnei',  23. 

powers  of,  as  jiartner,  23. 

dissolution  by,  23. 

ratification  by,  23. 

INJUNCTION  — 

when  granted  in  partnership  controversies,  153. 

INSANITY  — 

effect  on  capacity  to  be  partner,  24 
dissolution  of  firm  for,  246. 

INSOLVENCY  — 

as  ground  for  dissolution,  247. 

INSURANCE  — 

implied  powers  of  partner  as  to,  182. 

INTENTION  — 

as  test  of  partnershif),  43,  44,  54. 

INTEREST  — 

on  advances,  partner  not  entitled  to  without  agreement,  121. 

JOINT-STOCK  COMPANIES  — 

how  different  from  partnership,  7. 

JOINT  TENANCY  — 

how  partnership  differs  from,  8. 

JUDGMENT  — 

against  one  partner  bars  action  against  firm,  210,  211. 
LAND  — 

right  to  take  in  firm  name,  104-106. 

interest  of  partners  in,  108. 

dower  and  inheritance  in,  109. 

liability  of,  to  debts,  109. 

bona  fide  purchaser  from  partner  having  legal  title,  110. 

interest  of  surviving  partner  in,  111. 
LIABILITY  OF  PARTNERS  — 

upon  authorized  contract  of  partners,  192. 

ui^on  contracts  made  in  partner's  own  name,  194-198. 

upon  contracts  generally,  192-203. 

extent  of  liability,  214. 

for  torts,  204-206, 

for  partner's  negligence,  204. 

for  partner's  malicious  or  criminal  act,  205. 

for  partner's  breach  of  trust,  206. 

liability  joint  in  contract,  209. 

joint  and  several  in  tort,  213. 

beginning  and  ending  of,  218-220. 

270 


INDEX. 

References  are  to  sections. 
LIEN  — 

firm  creditors  no  lien  on  assets  of  firm,  2S7. 
partners  have  such  a  lien,  278,  279. 
attaches  to  what,  280. 
good  against  whom,  281. 
secures  what,  283. 
how  lost,.283,  299. 

LIMITED  PARTNERSHIP  — 
nature  of.  -ilO. 

must  be  authorized  by  statute,  811. 
statutory  requirements,  312. 
statute  must  be  complied  with,  813. 
conduct  of  business,  315. 
for  what  business  may  be  organized,  314. 
dissolution  of.  316. 

LIQUIDATING  PARTNER  — 
rights  and  powers  of,  273. 

LOSSES  — 

sharing  of,  as  test  of  partnership,  54, 

MAJORITY  — 
power  of,  189. 

MANAGEMENT— 

right  of  each  partner  to  participate  in,  118. 
MANAGING  PARTNER  — 

duty  to  exercise  good  faith,  112,  273. 
MARRIAGE  — 

wlien  dissolves  ^lartnership,  248. 
MARRIED  WOMAN  — 

capacity  to  be  a  partner,  25.  * 

MISCONDUCT  — 

of  partner  as  ground  for  dissolution,  255. 
MORTGAGE  — 

power  of  partner  to  make,  183. 
NAME  (see  Firm  Name). 
NEGLIGENCE  — 

liability  of  partner  to  partners  for,  114. 

liaVjility  of  firm  for  negligence  of  partners,  204. 
NEGOTIABLE  INSTRUMENTS  (see  Bills  and  Notes). 

NOMINAL  PARTNER  — 
who  is,  16. 
liability  of,  193. 

271 


INDEX. 

References  are  to  sections. 

NON-TRADING  PARTNERSHIP  — 
what  is,  162. 

power  of  partner  to  make  bills  and  notes,  174. 
to  buy,  176. 
to  borrow  money,  175. 
NOTICE  — 

to  partner  as  notice  to  firm,  when,  184 

NOTICE  OF  DISSOLUTION  — 
necessity  for,  258. 
in  wliat  cases  required,  259. 
to  whom  given,  261. 
how  given,  262,  263. 
who  should  give,  264. 
of  limited  partnership,  316. 

NOVATION  — 

new  contract  by,  on  dissolution  of  firm,  276. 

OSTENSIBLE  PARTNER  — 

who  is,  16. 

liability  of,  75, 
OSTENSIBLE  PARTNERSHIP  — 

distribution  of  assets  where  partnership  is  merely  ostensible,  2D9. 

where  partnership  is  actual  but  not  ostensible,  299. 
OUTGOING  PARTNER  — 

liability  of,  220. 

PARTIES  (see  Actions), 
PARTNERS  — 

defined,  1. 

how  classified,  16. 

who  may  be,  21. 

number  of,  28. 

how  persons  become,  38-73. 

rights  and  duties  of  to  each  other,  112-127. 

actions  between,  128-156. 

powers  of,  as  between  themselves,  158,  159, 
as  respects  third  persons,  160-190. 

majority  of,  powers,  189. 

who  are  bound  by  acts  of,  191-206. 

liability  of,  208-220. 
PARTNERSHIP  — 

defined,  1. 

essential  elements  of,  2. 

i:s  contract  relation.  3. 

37S 


INDKX. 


References  are  to  sections. 


PARTNERSHIP  (continued)  — 
whether  a  distinct  entity,  4. 
commercial  conception  of,  5. 
liow  differs  from  corporation,  6, 

from  other  associations,  7. 

from  joint  tenancy  and  co-ownership.  8. 

from  joint  purchasers  of  goods  for  resale.  9. 

whether  defectively  organized  corporation  is,  10,  11. 

promoters  of  companies  not  partners,  12. 
when  contemplated  become  consummated,  13,  14. 
classification  of,  15. 
for  what  purposes  created,  17-20. 
wlio  competent  to  enter  into,  21-27. 
what  formalities  required  to  create,  31. 
how  existence  proven,  36. 
what  acts  and  contracts  create,  38-73, 
tests  of,  45,  55. 

distinction  between  partnership  mfer  se  and  as  to  third  pei"sons,  39. 
by  ''  holding  out,"  69-73. 
articles  of,  75  et  seq. 
property  of,  93  et  seq. 
name  of,  82  et  seq. 
good-will  of,  87  et  seq. 
capital  of,  90  et  seq. 
dissolution,  231  et  seq. 

PARTNERSHIP  ARTICLES  — 
necessity  for,  75. 
how  far  conclusive,  76, 
how  construed,  77. 

enlargement  and  waiver  of  provisions  of,  78. 
continuing  under  old,  79. 
usual  clauses  in,  80. 
how  enforced,  81.  ' 

PAYMENT  — 

implied  power  of  partner  to  receive,  177. 
implied  power  of  partner  to  make,  185. 

PERSONAL  PROPERTY  — 

what  constitutes  property  of  firm,  94, 
may  be  held  in  firm  name,  101. 

or  in  name  of  one  i)artner,  102, 
title  in  firm  collectively.  103. 
interest  of  eacli  partner  in,  98, 

18  273 


INDEX. 

References  are  to  sections. 
PERSONAL  TRUSTS  — 

cannot  be  executed  by  partnership,  18. 

PLEDGE  — 

implied  power  of  partner  to,  183. 

POWER  OF  PARTNER  — 

as  between  the  partners,  158,  159. 

what  implied,  159. 
as  respects  tliird  persons,  160  et  seq. 
limited  by  usage,  159. 
limited  by  scope  of  business,  165. 
implied  powers  in  particular  cases,  169-188. 
after  dissolution,  271. 

PRINCIPAL  AND  SURETY  — 

when  continuing  and  retiring  i^artner  stand  as,  375. 

PRIORITY— 

of  firm  creditors  in  individual  assets,  289  et  seq. 

of  individual  creditors  in  individual  assets,  293  et  seq. 

PROFITS  — 

sharing  of,  as  test  of  partnership  inter  se,  46-53. 

as  test  of  partnership  as  to  third  persons,  56-68. 
PROMISSORY  NOTE  (see  Bills  and  Notes). 

PROMOTERS  — 

of  corporations,  not  liable  as  partners,  12. 

PROPERTY  OF  PARTNERSHIP— 

what  may  be,  93. 

what  constitutes,  94. 

property  bought  by  partner  in  his  own  name,  95. 

property  used  by  firm.  96. 

interest  of  partners  in,  97,  98. 

to  be  applied  to  partnership  debts,  122. 
PUBLIC  OFFICE  — 

cannot  be  held  in  partnership,  18. 
PUBLIC  POLICY  — 

pvirposes  opposed  to,  18. 
PURCHASE  — 

implied  power  of  partner  to,  178. 
PURPOSE  — 

for  what  partnerships  may  be  organized,  17, 

effect  of  illegal.  20. 

QU  ASI-PARTNERSHIP  — 
what  constitutes,  55  et  seq. 

274 


ESTDEX. 

Keferences  are  to  sections. 
RATIFICATION  — 

by  infant  partner,  23. 

by  firm,  of  partners"  acts,  190. 

of  the  execution  of  sealed  instruments,  180. 

REAL  ESTATE  (see  Land)  — 
of  partnership,  104-111. 
interest  of  partners  in,  108. 
liability  of,  106  et  seq. 

RECEIVER  — 

appointment  of.  in  partnership  controversies,  155,  156. 

REIMBURSEMENT  (see  Contribution  :  Indemnity)  — 
action  for  not  reimbursing  as  agreed,  1-40. 

REMEDIES  (see  Actions). 

RENEWAL  OF  PARTNERSHIP  (see  Continuing  Partnership;  Lim- 
ited Partnership). 

REPRESENTATIONS  (see  Admissions). 

RESCISSION  — 

of  partnership  contract  for  fraud,  251. 

RETIRING  PARTNER  — 

right  to  use  old  firm  name,  86. 

right  to  continue  business,  86. 

duty  to  give  notice  of,  264. 
liability  of,  266. 
SALE  — 

implied  power  of  partner  to  make,  186. 

SCOPE  OF  BUSINESS  — 
what  is  meant  by,  166. 
extending  by  conduct,  167. 
limitations  imposed  on  partners'  power  by,  165. 

SEAL  — 

partner  no  implied  power  to  execute  instruments  under,  180. 
ratification  of,  180. 

SECRET  PARTNER  — 
who  is,  16. 
liability  of,  19.3. 
action  by  and  against,  229. 

SEPARATE  CREDITORS  — 

right  of,  to  have  payment  out  of  separate  assets,  29.3  et  seq. 

SERVANTS  - 

liability  of  firm  for  acts  of,  207. 

275 


INDEX. 

References  are  to  sections. 

SHARE  OF  PARTNER  — 
what  constitutes,  97,  98. 
sale  of,  99. 
seizure  on  execution,  100. 

SILENT  PARTNER  — 
who  is,^16. 
liability  of,  193. 
actions  by  and  against,  229, 

SPECIAL  PARTNER  (see  Limited  Partnership;  Special  Partner- 
ship). 

SPECIAL  PARTNERSHIP  (see  Limited  Partnership)  — 
nature  of,  eilO. 

must  be  authorized  by  statute,  311. 
statutory  requirements,  312. 
necessity  for  comijlying  with,  313. 
for  what  business  authorized,  314. 
conduct  of  business,  315. 
dissolucion  of,  316. 

SPECIFIC  PERFORMANCE  — 

of  partnership  agreements,  li9-151. 

STATUS  — 

whether  partnership  is,  3. 

STATUTE  OF  FRAUDS  — 

when  requires  partnership  to  be  created  by  writing,  32. 

STATUTE  OF  LIMITATIONS  — 

power  of  partner  to  waive,  after  dissolution,  272. 

SUB-PARTNERSHIP  — 
what  constitutes,  30. 
rights  and  liabilities  of  members  of,  30. 

SUIT  (see  Actions). 

SURETY  — 

one  partner's  implied  power  to  bind  firm  as,  188. 

SURVIVING  PARTNER  — 

right  to  use  former  firm  name,  86. 
rights  and  powers  of,  268. 
interest  of,  in  real  property.  111., 

TENANCY  IN  COMMON  — 

how  differs  from  partnershii?,  8. 

276 


J 


INDEX. 


References  are  to  sections. 


TEST  OF  PARTNERSHIP  — 

as  between  partners  themselves,  40-54. 
as  respects  third  person.  55-73. 
sharing  profits  as,  4G.  56. 

TORT  — 

liability'  of  partners  in,  204. 
liability  in,  joint  and  several.  213. 
actions  for,  parties  to,  226,  230. 

TRADING  FIRM  — 

what  is,  162. 

power  to  make  negotiable  paper,  174 
to  borrow  money,  175. 
to  buy  property,  176. 
TRANSFER  OF  SHARE  — 

dissolves  partnership,  99,  243. 
UNIVERSAL  PARTNERSHIP  — 

what  constitutes,  15. 
USAGE  — 

effect  on  power  of  partners,  159. 
WAIVER  — 

of  provisions  of  articles  by  conduct,  78. 
WAR  — 

dissolves  partnership.  250. 
WILL  — 

continuing  business  under,  269. 

WINDING  UP  (see  ACCOUNTING;  APPLICATION  OF  Assets;  Puioritv). 

277 


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